Earning is financially very exciting. But at the same time, there are certain obligations and duties that are associated with earning. One of the primary reasons to begin earning is to secure the financial needs as much as possible within the minimum possible time. But, possessing a reckless spending habit will not help in this respect. Life can take a sour turn at any point in time. So it is better to keep certain funds available during dark times for remaining financially afloat.
From the perspective of any financial expert, it is best to inculcate the habit of saving as early as possible. Best utilisation of all the available resources is the key to succeed in this plan.
Getting rid of the habit of reckless expenditure is the primary step in the world of savings. This surely does not imply to stop living by becoming a miser. But, careful monitoring of the nature and objectives of expenditure is required. This will ease out the task of formulating an active budget plan and stick to it. It is best to keep a physical record of all the big and small transactions. This will make the allocations under each head easier.
Save for the target
Apart from the regular expenses, it is best to set aside a certain amount for occasional bigger expenses like travelling or renovation costs, etc. Taking loans for fulfilling these projects is not always the best solution as it is taking the individual a step ahead towards financial disaster. This habit of indebtedness gradually grasps any person into a debt spiral. It becomes very difficult to get free from such circumstances.
The best possible way is to save a certain fixed amount on a monthly basis in a savings account to avoid getting hooked into debt liability. There are short-term spanning 1-3 years, mid-term spanning 4-6 years and long-term goals ranging above 6 years. For fulfilling short-term goals, short-term debt funds, liquid funds or recurring deposits are the best investment options. For mid-term goals, corporate bonds, hybrid funds, ELSS, fixed deposits are ideal. For the fulfilment of long-term goals, PPF, NPS, ULIPS or equity fund investments can be considered. These investments will not only save funds but will also enhance the corpus.
Financial experts always emphasise the importance and insist on maintaining an emergency fund. This will help during unforeseen calamities. Unavailability of sufficient funds is one of the chief financially concerning factors of the loan-laden youngsters. Curtailing the habit of taking loans and securing a certain amount on a regular basis will save the day in times of dire financial need. It will even act as a safe source during passionate experimental career selections.
Possess a blow-it-away fund
During the early stages of the career, the responsibilities remain less and it is considered to be the ‘honeymoon period’ of the career life. But overdoing with the unnecessary splurging habit will jeopardise the financial health in the long run. It is best to inculcate the habit of saving and begin with planned investment moves as early as possible when the responsibilities are less.
Selecting the right insurance tool
Investing in life insurance, term life insurance and health insurance during a young age offers relatively cheap premium options. But when choosing the insurance early in life, the primary concern should be the fulfilment of the needs rather than the value of the premium. If started early in life, no premium amount seems to be too big in the long run. Any investor with a consistent effort to save money will never ignore this option.
Endowment plans are also a good investment and fund-enhancing tool. These policies not only increase the wealth corpus but also even offer tax redemption benefits under Section 80C and 10(10D) of the Income Tax Act.
Completing the education loan
People who begin their career with an education loan, the importance to repay the debt increases manifold. The interest applicable on any loan creates a considerable financial burden. Although there is the option of tax benefit on the amount of interest, that is applicable only for the primary 8 years. Therefore, the earlier these liabilities are repaid, the better. Moreover, the financial experts opine that once this sort of big-shot loan is repaid, it is best to refrain from taking any further big loans for a few years so as not to stretch the financial situation.
There exists no tax implication for individuals whose yearly income is up to INR 5 lakh. But anyone above this bracket has to pay taxes up to a certain fixed percentage. Investments should not only be fund-enhancing but also tax-saving at the same time. There are several tax-saving investment tools like NPS, PPF, etc. that suffice this sort of needs.
This is a mini-guide to provide certain effective, simple yet smart ways to save money.