Let’s face it – most millennials are notoriously popular for their YOLO attitudes and carefree lifestyles. But when it comes to money matters, we can’t help but wonder about their approach. Are they making smart choices? Do they have a wise investment plan? How serious are they about savings? These questions are extremely crucial for millennials, now more than ever, with the ongoing pandemic and uncertainty of the future looming large. So, in our ongoing series ‘Money & The Millennial’, we decided to ask established fashion designers and entrepreneurs for advice on how they earn, save and spend their money to better understand their mindsets and strategies that have helped them grow. Take notes.
We caught up with UK-based venture capitalist and investor Varun Datta. He provides initial funding for businesses. The young venture capitalist desires to develop original and cutting-edge concepts that will benefit target consumers and assist these companies in growing. To ensure that the money is used effectively, he also offers his personalised mentoring and guidance to these firms.
Here are his views on money matters and millennials’ saving and spending patterns-
Given your line of work, how do you keep a check on your finances? What’s the one financial tip you’d give anyone finding it hard to juggle expenses?
It starts with managing your cash flow because it will effectively aid financial planning. As venture capitalists, we need extra stability, so it’s essential to maintain a passive income and prepare for market lows with SIPs. One financial tip I will offer is to balance out how much you will spend, how much you will save, and how much you will invest beforehand and try to stick to it no matter what.
What are some key questions a millennial should ask before investing?
According to Warren Buffet, risk comes from not knowing what you’re doing. Consequently, I believe it is even more crucial for millennials, in particular, always to do in-depth research and assess the stock and intrinsic worth of the company for themselves. The most important thing to remember is that when investing seems too good to be true, it usually is, so thoroughly research the market before investing.
How often should one review their spending habits?
VD: You should constantly evaluate your spending patterns, and young people should be careful not to spend money on luxuries they cannot afford. I think saying no to things is the most crucial skill to learn, especially when spending time with friends. In this day and age, it’s also critical to avoid being influenced by purported influencers.
How do you segregate your finances? Do you have a particular formula that you follow?
Separating your finances is crucial since it safeguards your assets. For example, even though it can occasionally be simpler to equate the two, I have a separate company bank account and business credit card to pay bills or manage operations.
Is there a bad financial habit that you’ve broken? If so, what is it? And how can more millennials learn from your lesson?
I made common mistakes in the beginning, like rushing to make decisions, going over budget, and never genuinely putting the necessary time into future preparation. Millennials should, in my opinion, exercise extreme patience when making investment decisions and follow the 1% daily improvement formula, which will help them make sound financial habits.
It may seem counterintuitive, but why should millennials keep a margin for failure when investing?
Failures are a part of business, but millennials should try to minimise them as much as possible by planning ten years in advance, given all the technological advancements. Then, maybe they’ll find the next Apple, Tesla, or Microsoft.
How do you maintain a judicious balance between savings and spending? Is there an app you use to track your expenditure?
I often monitor and am subject to limitations so that I don’t go beyond and keep at least 25% of my earnings in a high-yield savings account to maintain excellent financial health. We utilise the most efficient applications like Mint, Every dollar, and Simplifi to check my expenditure and have exact data whenever needed.
Why is it important to have emergency savings and keep them in a high-yield savings account?
As a venture capitalist, preparing for worst-case scenarios is essential. Unexpected events can occur, as we have seen with Covid, and there may be slow periods where you must wait it out. In these situations, a high-yield savings account can be beneficial. In addition, a good formula is to save heavily and keep a six-month backup to run your business efficiently when you are receiving bad ROIs.
How would you explain the importance of savings to a millennial by using their lingo?
No pain, no gain’ is essential to remember. To make money, you have to spend money, and keeping cash in the bank is never a wise investment. Maintaining your cash flow requires considering inflation while diversifying your savings across various industries to reduce risk when one sector suffers.