Who says money can’t buy you happiness? If you have money, fulfilling your dreams, wishes, and otherworldly things you desire is quite possible. However, following certain finance basics is required if you ever want to have a stable economic lifestyle. Many times, people simply spend away all their income without thinking twice about savings or investing in the future.
While saving up for the future might not resound that well for many. You never know whether when it might come of help. Hence starting at an early age to ensure that you have complete financial independence is required. However, there are certain aspects of personal finance that you would have to follow to ensure your financial well-being is sustained in the best possible scenario. If you don’t know what they are, then they are given as follows.
Basic of personal finance
Investing
There is always confusion around investing or savings. Savings is nothing but keeping some of your money aside to use it later with no growth or little growth depending upon the time. However, investing is where you put your money in avenues where your money can grow, and you can reap the rewards. These avenues include mutual funds, equity in companies, stocks, etc. If you want to invest, there are different periods as they can range from short-term, medium-term, and long-term investments.
Short-term investments – These are investment options that you could invest in through a SIP for less than three years. These include liquid funds, ultra-short-term funds, or investing in mutual funds which offer short higher capital gains.
Medium-term goals – If you have goals where you want to have investment grow over three to five years, then you could pick up investments such as ELSS, debt fund investments, and others. Do note that these do have a lock-in period wherein you will have to pay that much amount of money in the funds every month.
Long-term investments – These investments are for retirement, education, marriage, and other purposes. These are for more than five years of investment’s and these avenues are in Multicap funds, long term mutual funds, large-cap funds, equity in companies, etc.
Tax savings
A citizen of a country has to pay taxes if you earn a particular sum monthly or annually. If you’re looking for other investment options wherein the taxes are levied or deducted, then there are about 70 odd deductions and exceptions that can bring down your total taxable income. These deductions and exceptions can be found in SECTION 80C and SECTION 80D of the income tax slabs.
Retirement planning
Retirement is where you have enough money in the bank where you don’t have to think about anything related to income whatsoever. However, for the working class looking for a better future, there are different ways to boost your retirement funds. You can invest in different mutual funds and pension plans to fund your retirement plan.
Savings
The most primary aspect of personal finance is savings. Many believe that savings aren’t required as long as you have a stable income. Losing your job or at the time of emergency and having no savings could end you in a greater turmoil and could cause a lot of problems. Hence, if you want, you can divide your income into segments wherein you could invest a little in mutual funds or other investment sectors while keeping a little in the bank and the rest of your personal use.
One of the best mediums for investment happens to be liquid funds. They offer better interest rates than banks, but withdrawing the money is possible after seven days of investment. Furthermore, your money is completely safe as there is no credit risk or interest risk. Also, keeping your money in the bank is not a bad option. However, you need to have the courage to not spend it if you are serious about saving.
Financial protection
Life is precious, and safeguarding it is the number one priority. In the present-day scenario, medical expenses is quite costly, and for the same, you could get away easily without incurring any expenses if you have the right insurance policy. Hence, there are different types of insurances that you can choose from based on your requirements. These are health insurance, term insurance, personal accidental insurance and mortgage insurance.
Note: To buy insurance, you would have to pay a monthly instalment every month or year to keep that insurance active until it is used in a scenario.
Bottom line
Personal finance isn’t something to be scared of; instead, it’s something to be looked into quite carefully. Following the pointers that are explained above should help for a better future. Also, investing in high-return investments does make a lot of difference, provided you know the avenues that provide the same. That’s why to start now to reap significant rewards in the end while not thinking about your finances ever again.
