Money Ki Baat: Important Financial Tips -Must Read
Posted On April 17, 2019
To manage the personal finance in a balanced way to fulfill the dream is key of success . During Manage your personal finance please go through the below mentioned important financial tips .These will help you out to achive your goal with full efficiency .
Prepare your assets sheet including Stocks,Mutual funds, FDs, NCDs, Gold etc ,and review performance every quarter, six months and yearly.If possible than choose online tools to track the same wherever it is possible. Remember it should be ideally in a quarter .More frequent review will lead towards loss.
Try to live in a house with a value lesser than 33% of your total wealth. Maintain your lifestyle. Your living Home is your liability. It doesn’t make you wealthier.
Keep a close watch on inflation. If you are living in India, Your FD, PF, NSC and PPF investment from 2009 to 2013 only makes you poorer due to the high inflation rate. Invest in such instruments which can beat inflation like Mutual funds, SIP etc.
Do not fall inDEBT Traps- This is the most important financial tip .Do not take a personal loan to buy a phone or go for vacation.This is called DEBT Trap. If you want to buy something, try to save first. Don’t just buy because it is on EMI.
An emergency fund is a must: Always have a handy budget of at least 6 months of your expense. It might be required in any personal emergency. This will also ensure you don’t break your monthly investments in SIP.
Life insurance is not an investment: While life insurance is a must, it is not an investment. Hence you should always opt for a term plan and never go for the endowment plan.Always remember this important financial tip that life insurance is only for life cover not for investment .
Understand the power of compounding – A lot of people do not understand the power of compounding. Compounding is nothing but interest on interest. The amount of money it generates in long-term is unbelievable. Hence, plan your retirement from day one of your income.SIP is best tool to enjoy power of compounding.
Expense ratio has an important role in mutual fund retuns: If you see a mutual fund generating 12% return then you will not get 12%. It excludes the expense ratio. So if the expense ratio is 1.5% then your returns would be 10.5%. On top of this, you have to pay a 10% tax on LTCG (Long Term Capital Gain) in India. So effective return is 9.45% (90% of 10.5%). Always ensure you chose a mutual fund with a lower expense ratio.
Inflation shrinks your money – With 5% inflation, Rs 100 would be equivalent to Rs 95. Hence, make sure you do not keep your money in a savings account as it gives 4% return. Therefore if you have Rs 100 in your bank then after a year it will be Rs 104 but with 5% inflation, it is equivalent to Rs 99. Today, you might think that Rs 5 crore is enough after 20 years but with 5% annual inflation, the value of Rs 5 crore would be just 1.8 Crore. In INDIAN scenario where inflation rate is to high .MONEY KI BAAT : Secrets of WEALTH CreationPUTTING MONEY IN BANK ACCOUNTS, EVEN IN FDs IS JUST LIKE TO KILL YOUR MONEY.USE LIQUID FUNDS TO PARK SURPLUS MONEY.
At first plan your goals and chart out them on the paper with required amount. After set your goals ,list out your goals map each SIP towards each goal. Your goals may be
Buying your own house
Saving for your retirement
Saving for your marriage
Children education and planning for marriage
Domestic and Foreign travel once in 2 yrs. etc.
Investing without a goal means investing randomly which may not be sustainable and can be stooped any time if any emergencies happened. Goal-based investment helps to be focused and disciplined in investing until the goal is achieved.
While investing in equity you should consider building your portfolio under Core and Satellite Approach. In this approach, according to the 20 to 35 age group, 60% of equity investment should be invested in the good qualitylarge-cap fund and multi-cap fund. And those in the mid 40s should allocate 80% in Large-cap funds. Large cap can generate 10 to 12% returns for SIP investments.
Avoid buying property on loans unless you have a clear plan for its repayment. Monitor cash flow.
Do not let this sentence scare you. “Mutual fund investment are subject to market risk”. Look at the history and growth of Mutual Funds.
Keeping money in bank as FD is not safe!- Inflation eats your interests
It is better to start investing now and buy your own home after some years(15-20 years) with your own money rather than taking a home loan now and repay more than double of the principal amount for your remaining years.
Invest in yourself: I am not talking about treating yourself with a shiny new car or jewelry. Investing in yourself can mean anything where you are learning and growing in the process of it. It includes reading, taking online courses, getting certifications, or even things like personal development programs. You are your best asset. The more you can invest in yourself the more valuable the asset becomes. This is probably the best investment you can make.
These are few suggestions , which will help you in creating wealth .