"Stop Thinking You’ll ‘Figure It Out Later’: How Ignoring Finances in Your 20s Limits Your Future"

Why Your 20s Matter More Than You Think

The earlier you start managing your finances, the more advantages you’ll gain from compounding. Think of compounding as the snowball effect for your money. A little bit invested today has the potential to grow significantly over the years. By starting early, your money gets more time to grow, and the earnings on your investments generate their own earnings over time. Albert Einstein called compounding the “eighth wonder of the world,” and for a good reason: it’s one of the most powerful forces for building wealth. At 12% return, every 6 years your wealth gets doubled, which means missing the first 6 years halves the wealth accumulation. Here is an example of performance of an investment of Rs 1 Lac at 12% return over different periods.

The True Cost of Delaying Investments

Let’s take a simple example. Imagine two friends: Ram starts investing ₹5,000 monthly at age 25, and Shyam waits until 35 to start investing ₹10,000 monthly. and both continue to invest till age 60. Let us see what happens to their wealth accumulation,

Though Ram invested ₹ 9 Lacs less than Shyam, his accumulation is Rs 2.75 Crores compared to Shyam’s  Rs 1.70 Crores, that is 1.05 Crore more.

Delay in starting investments can translate to lacs of rupees lost in potential wealth, simply because of waiting. As shown in example earlier a 6-year delay can reduce the end wealth by nearly half (@12% pa). So, putting off investing until “later” could be one of the most expensive mistakes you make in your life.

Common Excuses for Delaying—and Why They Don’t Hold Up

Many young people don’t start investing because they feel they don’t make enough or believe they’ll start when they’re financially stable. But this logic is flawed. Here’s why:

1. You Can Start Small: You don’t need a large amount to start investing. Today you can start SIPs (Systematic Investment Plans) with as little as ₹500 per month. Small amounts may not seem significant, but over time, even minor investments can grow into substantial sums. It's all about building a habit to save.
2. Financial Stability Isn’t a Destination: Financial stability is often seen as a goal, but it’s more of a journey. Building financial stability comes from disciplined habits like budgeting, saving, and investing early, which helps you see your wealth grow giving you the comfort in life. Waiting for the “perfect” moment to start will likely keep you waiting forever.
3. Future Income Won’t Make Up for Lost Time: Many young professionals think, “I’ll save more when I earn more.” But higher income later in life doesn’t entirely compensate for the years you lost on compounding. Starting early gives you a crucial advantage that no future raise or bonus can replace. We have seen in the given example hereinabove.

Practical Steps to Start Your Financial Journey

If you’re ready to take control of your finances, here are some steps you can start right now:

1. Set Up a Budget: A budget is the foundation of financial planning. Tracking your income and expenses helps you understand where your money is going and identify areas where you can cut back to save more. It helps you balance your sayings with lifestyle.
2. Create an Emergency Fund: Aim to set aside 9 - 12 months’ worth of living expenses in a savings account. This fund is your financial cushion in case of unexpected expenses or job loss.
3. Start a Systematic Investment Plan (SIP): SIPs allow you to invest small, regular amounts into mutual funds. This is an excellent way to get into the habit of investing without needing a lump sum.
4. Invest in Yourself: Finally, invest in building skills that can increase your income potential. Whether it’s taking a course, learning a new skill, or networking within your industry, investing in yourself often yields high returns.

Don’t Let “Later” Cost You Your Future

Your 20s are your prime years to build a foundation for wealth, don’t just let it slip by. Wealth-building doesn’t happen by accident; it’s the habit of saving, even if it is small, the habit of being consistent and disciplined with your investments over time. By taking control of your finances early, you’re not just preparing for a more secure future—you’re building a future that’s full of options, opportunities, and freedom.

So, stop thinking you’ll “figure it out later.” Start now, even with small steps, and let time work in your favor. The sooner you take control, the more power you’ll have to shape the future you desire.

Aakarsh Dalmia is a Certified Financial Planner^CM and an AMFI Certified Mutual Fund Distributor. You may contact Aakarsh Dalmia on 90513-55120 or email him at aakarsh@dalmiafinserv.com.