When we dream? we usually dream big! A beach house, a BMW, or a piece of land in the moon? there are so many things we want to buy/achieve in life. But, then we think, it’s impossible to create such kind of wealth in our lifetime and slowly start compromising with our dreams.
Now, it is true wealth can’t be created in one day, but it’s not impossible to create wealth over time if one is regular and disciplined with one’s investments.
Saving is the first step toward wealth creation. Now when we say? save smartly’, it does not mean saving whatever you are left with at the end of the month; it is more about learning to manage your expenses in a way so that you can save the amount that you want to save every month. Now, the easiest way to do this is by putting away the money you want to save every month as soon as you receive your salary. And, you manage your monthly expenses with the rest of the amount.
Saving is not enough; based on your financial needs channelize your monthly savings into investments.
Now, your investments have to have an objective and accordingly, you should define its tenure and then select the right investment tool for it. This is not an impossible task, but you have to do it right. Here is what you should do.
1. You should define your financial goal, whether you want it to save money for a trip, a car, or retirement, etc.
2. As per your goals, decide the investment tenure for each of the goals.
3. Third, now select the right mutual fund as per the investment tenure of your goal and keep investing in it through a SIP every month.
Since we usually have multiple financial goals with different objectives and timeframes, there should be different SIP investments meant for achieving each of these goals in time.
Your salary increases every year, so your investments should also increase every year. And your investments should increase in the same proportion as the rise in your level of income.
Whenever you receive a lump sum in hand? like when you receive a bonus or a maturity amount for investment? instead of splurging the entire amount, invest a part of it in your existing mutual fund. This way, your money will also grow faster helping you in two ways. Either, you can achieve the goal before time; or if you want to keep the tenure fixed, then at the time of maturity, the amount that you will receive will be more than the target amount.
nvestors always have the queries of what would be the ideal amount which one should invest or what should be the ideal percentage of salary which one should invest every month. There are different components on which this depends and no fixed formulae for everyone. Different factors help an individual in determining the amount which should be invested.
Mainly the income is being for 3 major purposes as –
The basic rule is that one should at least invest around 40 percent of their income from which around 20 percent should go to investing. Now, one should decide the amount which one should invest in the SIP monthly plans which could be difficult as alterations at a later level could be difficult depending on the changes in priorities.
There are various factors which one should keep in mind before fixing any amount of investment –
Obligations that are fixed – There are some of the obligations which are fixed, so a portion of it should be kept aside from the salary or income generated monthly. For doing these payments an amount should be kept aside as these are the basic requirements for supporting the daily routine life. Supposedly, a person Shyam is earning around Rs 40,000/- in a month. Out of this, the expenses which one needs to take care of are –
Rent = Rs 8,000/-
Electricity bill – Rs 3,000/-
Food and other bills – Rs 6,000/-
Total fixed obligation = Rs 8,000 + 3,000 + 6,000 = Rs 17,000/-
So, the total income which is left with Shyam for investment is around Rs 40,000 – 17,000 = Rs 23,000/- Hence, Shyam can do the investment in SIP with an amount up to Rs 23,000/- If an amount required for meeting fixed obligation is less than one will be getting a higher amount for investment and vice versa.
Withholding amount for an emergency – From the income which is left there are times when one sets aside a certain amount for unforeseen expenses. At any time, there could be an emergency and for that one needs to have some liquidity or money in hand. These funds which are withheld could be used at the time of emergency.
This amount can be kept in the form of cash with an individual or a bank under-saving account. Though, the best way to keep this emergency corpus under the liquid funds. This one will get the high liquidity facility and whenever there is a need it could be redeemed instantly without any issues.
So, the emergency fund will be accessible to individuals when they need it. The appreciation of an amount deposited will be around 6 to 7 percent, while on a saving account one will get around 2 percent of return. An amount for these should be set aside before considering investment into the long-term SIP plans.
Long-term goals – Every individual has their own financial goals and investing in SIP should be according to that. The corpus for these goals will be accumulated based on time, funds chosen, how much amount invested in which type of SIP, and for how long.
The SIP amount can be determined by choosing an amount for children’s education or retirement, funds chose to be like it’s a debt fund, equity-based fund, or growth fund. The amount invested in SIP and the type of SIP should be analyzed carefully depending on the stock market expectations and income one earns.
Conclusion
If one saves a small portion of their income earned monthly then it would help in creating wealth for the future. The consistency and persistence over a longer period will create a good investment portfolio. As there is an increase in income, one can increase the amount proportionally towards the investment for increasing the creation of wealth at a faster pace.
In our early or mid-20s, getting term life insurance is the last thing in our minds. The common belief is? being young and healthy, we do not need term insurance; Or since responsibilities are less, we do not need insurance, etc. Now, contrary to the popular belief, buying term life insurance early is not only important but also beneficial.
Here are the 4 reasons why you should buy term life insurance early
This is the biggest advantage of buying term life insurance early. As you grow older the premium amount for term life insurance policies increases significantly.
Let’s suppose, you want to buy a Rs 1 crore term life insurance plan, that provides you coverage till 75. If the yearly premium amount you are likely to pay is a little more than Rs 6,000 at 25, you pay around Rs 10,000 at 30. And at 45, you will have to shell out Rs 30,000 as the yearly premium for the same coverage amount.
At a younger age, you are healthy and have fewer responsibilities, insurance companies consider these factors while deciding term life insurance premium.
Once you buy a term policy, the premium amount is locked for a lifetime, i.e. it remains the same throughout the policy tenure. Hence, buying it early means saving a big amount of money over a period of time.
For example, for a term life insurance cover of Rs 1 crore till 75, a 25-year-old needs to pay a yearly premium of Rs 8,000. That is, he/she has to shell out Rs 4 lakh in the next 50 years. Meanwhile, for the same policy, a 35-year-old pays Rs 15,000 per year, i.e. Rs 6 lakh over the years in total.
So, you have to shell out Rs 2 lakh extra for the same policy for buying it at 35 and not 25. Thus it shows that buying early means saving more money.
Waiting too long to get term insurance is a risk as you are leaving your family vulnerable in case of unfortunate event or death early on, thus they may have to face financial hardships.
Buying a term life insurance early on means your family and dependents get covered earlier on.
Waiting too long to get term insurance means you are leaving your family vulnerable that if you die early then they would have to face financial hardship. Even if you are not married if your parents are dependent on you how will they manage their expenses? Plus, if you have any loan? automobile loan, student loan, or even credit card debt? your family members will have to pay for it. This might put them under more financial pressure.
Buying a term life insurance early on means you do not have to worry about it anymore.
The primary reason for buying term insurance is to ensure that your family does not have to go through financial trouble if you are not there. But you also enjoy tax benefits for buying a term plan.
Here are the 3 tax benefits you enjoy from the term plan:
Section 80C: Under this section, you can claim a tax deduction for the premium amount that you pay for the policy. Section 80C is the biggest tax deduction pool and under this section, you can claim a deduction up to Rs 1.5 for certain investments and purchases.
Section 80D: This exemption is allowed on the premium paid towards health-related coverage like critical illness riders. You can claim deductions up to Rs 25,000 for the premium paid towards it.
Section 10 (10D): The nominee can claim this tax benefit while claiming sum assured in case of the death of the policyholder. The entire amount is completely exempt from taxes.
Term life insurance is an essential financial product that you have to buy at some point? sooner or later. But, if buying term life insurance early on translates to benefits like paying less, enjoying tax benefits from the early stage of your career, cover for your family earlier, etc, why miss out on them.
Financial independence is a state where you are able to meet all of your needs without the help of other people.
Some people think that financial independence is a pipe dream. They don’t believe they can ever break free from the shackles of their job and get to the point where they are financially stable.
But it’s possible to live a life of financial independence. All it takes is a little bit of discipline and some good old-fashioned budgeting.
If you want to be financially independent, you need to set up a budget that works for you and stick with it.
The first step to becoming financially independent is to establish an emergency fund. This is a savings account that can be used for emergencies such as medical expenses, car repairs, and sudden job loss.
Establishing an emergency fund is a good way to start saving money because it helps you build confidence in your ability to save money. It also provides peace of mind when dealing with unexpected events.
Financial independence is a state in which an individual has enough money to live on, and is not reliant on the government or any other entity for income. Financial freedom, on the other hand, is a state in which an individual has enough money to live on and can afford to do anything they want.
There are many ways to become financially independent. The most common way is by saving money and investing it wisely. These two terms are often used interchangeably but they refer to different things. Financial independence means that you have enough money saved up that you will never have to work again while financial freedom means that you have enough money saved up so that you can do whatever you want with your life.
It is not enough to just save some money. You need to invest it the right way and make it grow. There are many ways to invest your money but you need to be careful in order not to lose everything.
Investing your money is a crucial step on your way towards financial independence, so you should know what you are doing. The first thing that you need to do is find out where you can invest your money and how much risk you are willing to take on.
Financial independence is not just about the money. It’s about having the freedom to do what you want to do, when you want to do it.
It is important that we are creative and find ways to be financially independent. There are many ways in which people can attain financial independence such as starting a business, investing in stocks, or saving their money wisely.
