Personal Finance Planning

Today I will be telling you about some important financial instruments and how to enroll for them.

Experts tip for investment is that invest first and spend later. If you drawing some money from any source and want to save money for future then definitely follow this advice.

First, divide your money into 3 parts
  1. Emergency funds- This is the fund which will help you get settled in case your main source of income is lost. it should be at least equal to 6 months of your earning.
  2. Regular expenses- You are living your life for the while and you know how much you need monthly. 
  3. Saving or Investments. You should save at least 20% of your monthly income. Add in your saving first and then spend your money.

Here are some financial instruments.

  1. PPF:  You could save up to 1.5lac per year and it is covered under 80c. Your money is locked for at least 5 year and complete withdrawal is permitted only after 15years. Partial withdrawal is allowed after 5years.
  2. NPS- It is voluntary pension scheme one can choose. Money invested under this also comes under section 80C.
  3. Mutual funds: These are a pool of funds managed by a professional person who helps to increase your funds. It comes under different categories ELSS, Hybrid, Large, Mid-cap funds.
  4. Equity/Stock markets. You earn a share in the company and enjoy conversion as per market returns.
  5. Bank, post office deposits. You earn fixed interest rates on your investments. This investment comes under tax bracket.
Freedom towards finances
  1. Insurance policy- Buy an insurance policy which will help your family members in case of your sudden demise. Do not confuse this with health insurance which is a completely separate thing.
  2. Health Insurance- This scheme will help to cover your and your dependents medical expenses in case of any hospitalization or immediate/planned treatment needed.
Both things which are mentioned above if started early gives better coverage and less premium to the policyholder. There are hundreds of policies available and one should enquire about the terms and conditions properly before getting enrolled in any of the schemes.

One should avoid any capital expenditure unless it is very much required. Taking a huge loan and then buying is not a good idea always so do proper planning before taking such step.

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