The pandemic must have disrupted your life, but you still need to keep your future financial goals on track. How do you stick to your monthly investing schedule with the pandemic? What changes do you need to make to your lifestyle so that your financial goals don’t suffer?
If you need answers to these questions and more, read on. We’ll guide you regarding the strategy you need to follow to continue investing during these times without hassles. It’s not as tough as you think!
Smart Ways to Invest for Your Future
Here are the steps you need to follow for successful investing:
Manage Your Credit Card
You’ll be surprised to know how your credit card can help you achieve your financial goals. All you need to do is manage it wisely. Here are some things you need to keep in mind:
- Check Your Spending: Don’t overspend with your credit card and use it only for your regular expenses
- Set a Credit Limit: Your credit limit should cover your monthly expenses and should not be too high, or else you might overspend
- Verify Your Credit Card Statement: Tally your bills with the credit card statement to ensure that it is accurate.
- Optimize offers and Rewards: Make sure that you utilize the offers, rewards, discounts, and cashback for maximizing savings
- Easy Loans: Use a quick loan and repay it before the due date during an emergency like hospitalization
- Stay Safe: Use contactless credit cards for protection from the pandemic.
There are different credit cards from leading banks like HDFC that offer discounts and rewards on shopping, movies, dining, and travel. Find the HDFC credit card for your needs. For higher savings, use apps like CRED that provide additional offers.
Build Up an Emergency Fund:
Emergencies strike without warning, so it is advisable to keep 3 to 6 months expenses aside in a savings account. The amount you set aside also depends on the nature of your job. If you have fluctuations in income, then a higher emergency fund is recommended.
Don’t forget to replenish your emergency fund after using it. Make this a habit.
Set Financial Goals:
Investing without a financial goal is like running without a finish line. Every goal has tenure, so plan your investment accordingly. Examples of long-term goals are retirement and higher education for children, while short-term goals include the down-payment for your new car.
Just setting a financial goal is not enough; you need to keep revising it according to your present situation. Your goals keep changing from when you were single, to getting married and having children. Your investing strategy should be in line with your financial goals.
Asset allocation means using more than one asset when creating your portfolio. Different assets provide different returns. For long-term wealth creation, you need equity in your portfolio since this asset has historically generated the highest post-tax returns when the investment horizon is over ten years.
Debt funds or fixed deposits are more stable compared to equity and are used to achieve short-term financial goals. If you need money in 6 months or less, then a liquid fund or savings account would be the best choice. Assets like gold provide a hedge against portfolio fluctuations, and it is advisable to invest around 5 to 10% in gold.
Monitoring Your Cash Flows
Put simply; cash flows are the difference between your monthly income and expenditure. The first step towards investing is ensuring you have a positive cash flow where your income is higher than your expenditure.
If you are running out of money before the end of the month, then you need to make a list of expenses stating the essential and non-essential expenses. Stop the non-essential expenses like unnecessary shopping so that you can start saving.
Repay Your Loans
Repay your EMIs as early as possible and use your surplus funds for this. If you have an existing loan, try to negotiate the interest rate with your existing bank or transfer your loan to another bank that offers you better rates.
Find out if the loan has a prepayment clause and if possible, repay your loan before time. When you are debt-free, you start saving more every month, and this can be invested.
Have Adequate Insurance
Investing without insurance can upset your financial plans and put your family at risk. There are two types of insurance you need, health and life insurance. While health insurance protects your savings, life insurance protects your family.
Don’t look at health insurance just for tax benefits. Considering the rising costs of hospitalization, you need to have adequate insurance. Get insured when you are young as you won’t need to undergo any medical tests and also enjoy a low premium.
The best form of life insurance is a term plan. You don’t get any maturity benefits, but your family is protected in your absence. The premium for term plans is the lowest.
Maximize Your Deductions:
If you want to create wealth and save taxes, then don’t forget the 80C deductions available under the Income Tax Act. Your options include Public Provident Fund or PPF, equity-linked savings schemes or ELSS, and Sukanya Samriddhi Scheme with a combined ceiling of Rs. 1.5 lacs. If you are a working professional, you get a standard deduction of 40000.
Interest on home loan for repairs up to Rs. 30000 and 100% exemption for interest on Education Loan under Section 80E are other options. Don’t forget 80D deductions for your health insurance. You can claim up to Rs. 25000 for yourself and your family and an additional Rs. 25000 or Rs. 30000 depending on whether your parents are senior citizens or not.
Depending on whether you are a conservative or moderate investor, you can optimize your 80C deduction using a combination of PPF and ELSS. PPF offers tax-free returns, and the maturity amount is also tax-free. To find out how you can pay off your outstanding debt, use the debt payoff calculator.
Invest Today for a Secure Tomorrow
Take control of your finances today by exploring the options discussed here. Make sure where every rupee is being spent and cut down on wasteful expenditure. Pay off your liabilities and become debt-free as soon as possible.
Create a separate investing account and make sure that you follow the rule, income minus investment equals savings. Happy investing!
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.