Summary of "8 Money Traps You MUST Avoid in Your 20s | DEEPAK BAJAJ"
Summary of "8 Money Traps You MUST Avoid in Your 20s | Deepak Bajaj"
The video by Deepak Bajaj highlights eight critical financial traps that commonly ruin the financial future of people in their 20s. The key message is that poor financial habits, rather than low income, are the root cause of financial distress. Deepak not only identifies these traps but also provides actionable strategies and tools to avoid or escape them, emphasizing disciplined money management and long-term planning.
Main Financial Traps and Strategies
- Living on Credit, Not Income
- Avoid spending beyond your salary using credit cards or loans.
- Use the PEARL Budgeting System to control expenses:
- P (Protection): 10% on insurance/emergency funds.
- E (Essentials): 60% on basic needs (rent, food, bills).
- A (Assets): 15% on investments (mutual funds, gold).
- R (Recreation): 5-10% on leisure within budget.
- L (Learning): 5-10% on self-development (courses, books).
- Tools: Credit, Wallet, Money apps for expense tracking.
- Set up auto-debit for investments before spending.
- No Emergency Fund
- Build a financial safety net equivalent to 6 months of expenses.
- Keep funds in liquid mutual funds or sweep-in fixed deposits for better returns and liquidity.
- Tools: Kura, Grow app for liquid funds; ET Money for SIP tracking.
- Automate transfers to emergency fund on salary day.
- YOLO (You Only Live Once) Spending
- Avoid unplanned spending on parties, trips, gadgets.
- Follow the formula: Income - Investment = Expenses.
- Use apps like Jar, Scripbox, ET Money, Paytm Money to automate investments and manage expenses.
- Plan recreation spending within limits to avoid guilt and financial stress.
- Ignoring Investing
- Start investing early to leverage compound interest.
- Example: ₹3,000/month from age 25 can grow to ₹1.5 crore by 60; starting at 35 yields only ₹45 lakh.
- Use the Rule of 72 to estimate money doubling time (72 ÷ interest rate).
- Start small with low-cost index funds or mutual funds via platforms like Zerodha, Coin, or SIP calculators.
- Investment is a habit, not an amount.
- Not Upskilling = Stagnant Income
- Continuous skill development is essential to increase market value and salary.
- Use the LEAP Formula for career growth:
- L: Learn new skills (digital marketing, AI, finance, etc.)
- E: Execute projects to gain experience.
- A: Ask for feedback and improve.
- P: Pitch for money—monetize skills via freelancing platforms (Fiverr, Upwork) or negotiate salary.
- Platforms: Coursera, EDx, Skillshare, YouTube, Zerodha Varsity.
- No Tracking = No Control
- Track income, expenses, and investments regularly.
- Maintain a simple 3-column money journal:
- Income sources
- Expenses (fixed and variable)
- Investments
- Review weekly to identify leaks and set limits.
- Tools: Wallet, Money Manager, Good Budget, Notion, Excel, Google Sheets, Kerva, ET Money.
- Peer Pressure = Poor Future
- Avoid lifestyle inflation driven by friends’ spending habits.
- Understand your own financial priorities and boundaries.
- Practice financial maturity by silent progress, not show-off.
- Always ask if an expense is your decision or due to peer pressure.
- Build a financial identity based on your goals, not comparison.
- Delayed Insurance = Disaster
- Get insurance early regardless of age or health.
- Two key insurances:
- Term insurance for life protection (₹1 crore cover available at ~₹600/month).
- Health insurance covering OPD, day care, cashless hospitals.
- Avoid confusing insurance with investment products like LIC endowment plans.
- Insurance protects your wealth shield from unexpected disasters.
Methodology / Step-by-Step Financial Game Plan
- Budget using PEARL system
- Build and automate an emergency fund
- Automate monthly investments before spending
- Start investing early and regularly using SIPs and low-cost funds
- Continuously upskill and monetize skills (LEAP Formula)
- Track all financial inflows and outflows weekly
- Set financial boundaries and avoid peer pressure spending
- Get adequate insurance coverage early
Recommended Tools & Apps
- Expense & Budgeting: Credit, Wallet, Money Manager
Category
Business and Finance
