financial planning, investment options, types of investment, lumpsum investment, sip investment, where to invest money, importance of investing, Mutual funds
Are you one of those individuals who gets intimidated by the mere thought of financial planning and investments? Well, you could not be more wrong if you think that you need expertise and superior knowledge to manage your money in an efficient way. However, the truth is that being knowledgeable and highly skilled in this area is like icing on the cake. So, you need not need to fret if you are new to the investing world. Here are five golden rules for beginners to kick start their financial plan and journey towards different types of investments.
- Begin early and save more
If you have been living under the rocks for assuming that financial planning is ought to be done in your mid-40s, you cannot be more wrong. If you wish to safeguard you’re your mutual fund investments serve their investment purpose, it’s vital that you start saving and investing early. Financial advisors guide starting as early as the day you receive your first paycheque. This is done to provide your investments with the much-needed time to grow and perform to their full potential. What’s more, this also amplifies your compounding rate of interest, thus offering more returns. - Allocate your budget efficiently
One of the thumb rules of budget allocation is considering simple budgeting plan that includes the good old 50/30/20 rule. This rule doesn’t dive deep into the particulars of several spending categories. This rule states that an individual should allot 50% of your income towards essentials such as rent or mortgage, healthcare, groceries, insurance, utilities, etc. Then, you must allocate 30% of your salary towards your wantssuch as vacation, music festivals, shopping, dine-outs, movies, etc. Finally, allot the rest 20% towards your savings and investment. You can use this plan to start with your financial journey. - Pay off your debt
One of the biggest obstacles in a financial plan is the mounting debt on investors. It could be your credit card debt, home loan debt, personal loan debt, student loan debt, etc. This distracts several investors from focusing on much more important things and financial objectives. What’s more, if things go out of hand and you are not able to pay off your debt in time, you might fall a victim to debt trap. So before you decide where to invest your money and begin your financial journey, try paying off your debt as much as you can. - Do not forget to factor in tax implications
Taxes aren’t likely to go away anytime soon. Do your investment options help to save tax while offering inflation-beating returns? If it does, then you are on the right track. An investor should make full utlisation of the Section 80C tax deduction of up to Rs 1.5 lac and invest it in several tax-saving investments according to their financial portfolio. Some options include ELSS tax saving mutual funds, bank fixed deposits, Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizens Savings Scheme (SCSS), Unit-Linked Insurance Plan (ULIP), etc.
Finally, keep in mind that financial planning is not a one-time thing. You ought to monitor your investments and financial portfolio on a regular basis. Frequent monitoring will help you to spot certain investment opportunities that you may have missed earlier. It will also help you to assess your underperforming assets. Happy investing!