It is essential that we focus our efforts on three things. These are the steps to building wealth:
Insurance separate from investment
Most people put off planning for their investment and tax needs until the end of the financial year. They often try to solve their complicated problems by purchasing insurance. While they may save taxes, wiser investing can help them reap the benefits. The common endowment policy will not only provide minimal income but also the greatest potential to create enduring wealth. The death benefits that you receive from insurance do not provide enough to meet the long-term financial needs for your dependents. Separating your investment and insurance needs is a better option.
Participate in Monthly Investing
You don’t have to think of investing as getting insurance. Financial experts believe that investing in equity, mutual funds and gold is the best way to build long-term wealth. Small savings accounts such as PPF or Sukanya Samriddhi Scheme are also effective. Monthly investing is possible regardless of how small or large the investment goal. You should invest a minimum of 2,000 rupees per month if you have the funds. You can invest Rs 4,500 in a mutual funds Systematic Investment Plan, which will grow 10% annually for 30 years and build a portfolio of Rs 1.02 crore. Your monthly investment in a mutual fund Systematic Investment Plan would be Rs 7,500, or Rs 13,500 if you have only five years to reach the same goal. All this is due to compounding interest rates.
Get term and dependent insurance
Consider life-term coverage for those who have dependent family members. This should be in excess of 10-20% of your annual income. For example, an endowment policy that is less than this amount may not be sufficient to cover the financial needs of your dependents. Term plans can be very affordable and provide many benefits such as monthly income and premium return. You should also consider purchasing health insurance for each member of your family. You will be able to significantly reduce the amount of money you’ll have to pay out for a medical emergency.
Avoid panicking at the end, especially if a large TDS happens in March. Tax is a one-year process. Everyone has one year to determine what they earned and what they should pay. To maximize your tax savings, you need to make the most of this year. Section 80 (C), equity-linked savings plans, and public provisionnt fund may bring you longer-term benefits than insurance plans. You can also save more tax by purchasing health insurance for yourself and your dependent parents. You must ensure that the figures you have for your home-acquisition loan principal, interest repayments and rentals are correct. If you fall below the exemption limits, it is important to invest in tax-reducing instruments as soon as possible. The interest earnings limit is the best way to achieve efficiency with FDs. For greater income and tax efficiency, you can invest in debt mutual funds to get higher income.
Get digital payments
There are more benefits to digital payment than cash. Digital payments are more attractive than cash due to demonetization. However, be cautious about online fraud and scams. Automating payment lets you pay your credit card, netbanking, or e-wallet bills electronically, without having to use cash. This allows you to earn reward points and cashbacks. ECS instructions can be issued to pay your insurance premiums or EMIs. As more people do, you can use your debit card to make any transaction. E-commerce is a great way to make everyday purchases like groceries or medicines. There are many apps and websites that allow you to do this. With the increasing use of digital financial products, the future looks bright. You and your friends should consider switching to digital banking and digital wallets because of the ease of use.