- Financial advisors can charge exorbitant fees but may not add proportional value, especially for millennials just starting out.
- With some effort to learn money management basics, millennials can absolutely implement DIY money management in their lives.
- Focus first on essentials like budgeting, building emergency savings, getting insured adequately and understanding taxes.
- Investing is important but best started small with low-cost index funds, not expensive actively managed funds.
- Plentiful online resources and communities make DIY finance education easier today. Learn constantly.
🤔Why You May Not Need a Financial Advisor as a Millennial
Let’s level with each other – DIY money management can seem complicated, even scary at times. Complex financial products, impenetrable jargon, constantly changing regulations – it’s a jungle out there!
So when we start earning, it can be tempting to just hand over the reins to a financial advisor. But this may not always be the best choice, especially for millennials. 👇
💸 Advisors are EXPENSIVE
- Most advisors charge annual fees ranging from 1-2.5% of assets under advice (AUA), meaning the total value of investments they handle for you.
- For example, if you invest ₹50 lakhs with an advisor who charges 1.5%, you’ll pay ₹75,000 in fees yearly!
- These fees apply even if the advisor underperforms compared to simple index funds. It’s a payment for the privilege of their ‘expert’ advice.
- Some also charge hefty commissions when selling financial products like insurance policies or high fee investment funds.
Of course, we all want the best for our hard-earned money. But are these advisors worth the high price tag for most millennials? Often, the answer is no.
📈 Advisors Don’t Have Crystal Balls
The markets are notoriously hard to predict consistently, even for professionals.
- Hot tips, stock picking strategies, market timing calls – more often than not these fail to beat the market.
- Model portfolios may not match your unique risk appetite and financial goals. One-size-fits-all advice has limitations.
- Advisors themselves admit they cannot foresee market corrections or perfectly time entries and exits.
It’s not prudent to expect advisors to have a magic crystal ball for your investments. Past performance does not guarantee future returns.
👩💼 You Know Yourself Best
As a millennial starting your career and financial journey, you are the expert when it comes to your:
- Life goals, financial priorities and time horizons
- Income stability and growth projections in your profession
- Risk tolerance and willingness to ride out volatility
- Unique circumstances, responsibilities and expenses
An advisor may make recommendations misaligned with your needs. You are best positioned to manage finances tailored to your situation.
🏋️♀️ Money Basics Aren’t That Complex
While high finance and complex products do require specialization, the essential money management basics are very learnable:
- Making and sticking to a household budget
- Building an emergency fund
- Adequately insuring health, life and assets
- Understanding tax liabilities and how to optimize them
- Starting investing with low-cost index mutual funds
With some effort and discipline, millennials can absolutely master their finances without paid advisors. The fundamentals are not rocket science!
📱 Technology is Empowering
Managing your own finances is much easier today thanks to an abundance of technology resources:
- Budgeting and money management apps
- Low cost robo-advisors
- YouTube channels, podcasts, blogs, online courses
- Facebook communities to exchange knowledge
- Easy online investing platforms and tools
The DIY money management revolution is real. With so much information and help available, paying advisors is certainly not the only option.
✅How Millennials Can Implement DIY Money Management in their lives
Convinced it’s worth trying your hand at money management? Here’s a step-by-step guide to get started:
🟢 Step 1: Make a Budget
- Track your spending in detail for 1 month, using an app like Mint, WallyGpt, GoodBudget. See where your money is going.
- Categorize expenses as essentials, lifestyle and discretionary. Prioritize saving.
- Make adjustments to align expenses with your saving goals and income.
- Automate savings transfers to happen right when salary hits your account.
Top budgeting tip: Start lean, but make it realistic. No need for extreme frugality if that’s unsustainable. Slowly ramp up savings rates as your income increases.
🟢 Step 2: Build an Emergency Fund
- Start with a small emergency fund of say ₹50,000. Gradually build up to cover at least 6 months of expenses.
- Keep the fund in liquid assets like savings accounts, sweep FDs or short-term debt funds.
- Withdraw only during true emergencies – unexpected job loss, medical crisis, family emergency etc. Avoid dipping into it lightly.
Pro tip: Even ₹25,000 in emergency savings is better than nothing. Start small but start today.
🟢 Step 3: Get Adequately Insured
- Buy a basic health plan offering ₹5-10 lakh coverage, and top up with corporate insurance. Increase cover and add a super top-up, as your income and expenses grow.
- Buy term life insurance worth at least 10-15 times your current annual income. Your life cover should include outstanding loans, and money required for future goals like children’s higher education.
- Review policies when life stage changes – marriage, new baby, empty nest, retirement etc.
Insider advice: Don’t mix investment with insurance. Term insurance gives the optimal protection and value for money.
🟢 Step 4: Understand Your Tax Liabilities
- Learn what deductions and exemptions you qualify for. File your own taxes.
- Keep digital records organized for future filing and potential audits.
- Understand how tax slabs work, and optimize instruments like NPS,EPF,PPF, ELSS, 80C etc.
🟢 Step 5: Start Investing
- Begin with small monthly SIPs in a Nifty index fund for 10 years minimum if it aligns with your risk tolerance and risk capacity. Invest in direct plans through the AMC’s website.
- Maximise the use of small savings schemes like EPF/VPF/PPF for your long-term goals like planning for retirement.
- Increase investment amount and portfolio complexity gradually as knowledge grows.
First-time investor guidance: Start investing early and stay invested. Don’t obsess over daily NAV changes. Equities are highly volatile in the short term but can potentially beat inflation in the long term.
🟢 Step 6: Avoid Common Blunders
As you gain experience, beware these common mistakes:
- Panic selling or greed buying during market swings. Stay the course.
- Getting swayed by hot trends, news or stock tips. Stick to sound principles.
- Day trading, overtrading, churning portfolio frequently. Patient investing wins.
- Not having a plan or investment policy statement to guide decisions.
Wisdom from Warren Buffet: “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
🟢 Step 7: Continue Learning
Some recommendations to further grow your money smarts:
- Read personal finance books and blogs focused on basics. Avoid get-rich-quick schemes.
- Watch YouTube channels like Ben Felix and Freefincal for investing perspectives.
- Join Facebook communities and online forums like India Investments to exchange knowledge and advice.
Lifelong learner mindset: Consider learning about money management like going to the gym – require commitment and discipline, but pays lifelong dividends.
Confused or have doubts? Here are answers to some common questions:
💡 Is it wise for millennials to fully manage finances alone?
A balanced approach is ideal. Use low-cost robo-advisors for investing. Seek hourly financial planner services for one-off advice on major decisions or milestones. But be actively involved in your money – don’t fully outsource.
💡 How much time does DIY money management take?
Expect to spend 5-10 focused hours per month in the beginning on learning, budgeting, researching investments and taxes. This reduces as knowledge and systems are built.
It’s like learning to ride a bike – shaky at first but gets easier. And the skill serves you for life.
💡 What are some good resources for DIY finance education?
- Blogs – FreeFincal, GetRichSlowly, CollabFund.
- YouTube – Ben Felix
- Online Communities – India Investments and Personal finance India Subreddit, Asan Ideas For Wealth Facebook group.
- Investment and Tax Planning tools: SEBI Investor education website
💡 How can I estimate my retirement corpus target?
Factors like current age, expected retirement age, post-retirement monthly expenses, expected rate of return and inflation will impact the required corpus. Online retirement calculators can help estimate the corpus you may need to build.
💡 What are Nifty and Sensex? Should I invest in them?
Nifty and Sensex are indices reflecting the overall stock market. Index funds that mirror them provide diversified, low-cost investing. Start SIPs in Nifty or Sensex index funds for long-term wealth creation if they align with your risk tolerance and risk capacity.
💡 How should I select health and term insurance policies?
For health, prioritize adequate cover over premiums. For term, opt for cover of 15-20 times annual income. Compare claim settlement ratios when selecting insurers. Increase cover at major life stage changes.
Start today and believe in yourself! With some diligence and commitment to self-education, you can absolutely take smart control of your hard-earned money without expensive advisors.
The rewards like achieving financial independence, building wealth and reaching your goals are so worth the effort.