Priorities, needs, aspirations as well as personal circumstances change over time, but one of the constants amidst them all, regardless of a person’s age or stage of life, is money – to ensure, above all, that a person has the financial means to get where he wants to go in life.

Each decade of life presents a unique set of demands, challenges and dynamics that dictate how a person handles his finance. A fresh graduate in his twenties, for example, likely has a much different outlook on money than a 35-year old parent of two, or a 60-year-old retiree.

However, as much as financial mindsets and life circumstances vary from person to person, each decade of a person’s life comes with a distinct set of fundamental financial keys that, if adhered to, should put a person in the position to roll with the changes, meet their needs, and fulfil their aspirations.

Rafiq Hidayat Mohd Ramli, Managing Director, Wealth Vantage Advisory Sdn Bhd, talks about financial planning in one’s 20s and 30s, while looking also at tips and solutions for managing one’s finances for a better life.

In Your 20s: Encouraging Financial Literacy

Based on what I’ve seen, the biggest issue, at least in Malaysia, is the lack of financial literacy. Just imagine, throughout our growing years, from kindergarten to tertiary education, there is no formal education of how to manage our finances.

Those who are lucky enough to have either parents or relatives that are very financially savvy will be way ahead of their peers, who will probably learn how to manage their finances only after making financial mistakes.

The lack of financial literacy is what leads to the financial mistakes that most people in their 20s commit once they receive their salaries. They will:

  1. Live beyond their means, for instance buying cars they cannot afford, or going on extravagant holidays, or even sometimes buying their so-called dream home. In order to do so, they will then be forced to use credit facilities that are readily available such as credit cards and personal loans in order to achieve their wants;
  2. Not put aside money for emergencies. This may sound simple, but most people do not have sufficient liquid assets to last them for at least 6 months if they were hit with a financial emergency;
  3. Not prepare a budget and follow it diligently;
  4. Make poor investment choices, including investing in pyramid schemes or scams, and not understanding their risk profiles when they invest even in regulated investments such as unit trusts and stocks.

To me, as stated earlier, the main thing that needs to be done is to create financial literacy programmes to help these 20-year-olds understand the impact of the decisions on their finances – in the present and in the future. For those who are already in trouble due to the mistakes made, they can always seek help from professionals such as Licensed Financial Planners.

In Your 30s: Minding Your Priorities

While those in 30s are generally more stable in terms of generating a monthly income, they also tend to have a higher amount of commitments. The commitments include family related expenses such as children and education, and also debt commitments due to purchases such as cars and houses.

At this point of time, unless their money is managed properly, most of the people in this group will start to feel the financial pinch. All the financial mistakes that they have done in their 20s are catching up with them. It is at this point of time when cash flow issues will crop up.

Whether you’re living by yourself or still with your parents, you can always reduce your expenses should you not have sufficient money to sustain yourself. However, the same cannot be said once you have your own family. Some people in their 30s will have up to 60% of their monthly income channelled to debt repayments, and this will reduce their abilities to focus on other life priorities such as protection, saving for children’s education and even retirement.

 Having a professional to look into how you manage your finances especially ways to reduce your debt will help most people in this group improve their monthly cash flow situation which will also help them to start focusing on their other life priorities.