Saving a considerable amount of your money on a regular basis would definitely help to meet your future expenses or at the time of emergency. There are lots of ways to save or invest your money depending on your personal profile, dependants and risk appetite. Unless you prepare a savings plan it would be difficult to meet your financial goals.
Don’t put all your eggs in a single basket. Try to diversify your investment across Stocks, Mutual Funds, Government Bonds, Term Deposits and Savings Account. Diversification helps to reduce the risk and loss associated with each of the financial products. Cultivate the habit of savings right from the time you start earning. If you start saving your money in a younger age you might not struggle in future.
The age around 25 years is an optimal time to start saving your hard-earned money. Our life is filled with major events like marriage, birth of child, death, purchase of new homes etc. A well-planned savings activity would help to meet the expenses associated with these major events. Act wisely so that you don’t regret in future. Make sure you work on allotting some funds for your after-retirement life.
Savings Account in a Bank
Opening a Savings account in a Bank should be the first step to start saving your money. Savings account offers the benefit of depositing the money when you have and withdrawing the money when you need it. Apart from the deposited money you may also receive extra money by way of Interest.
Term Deposits or CD (Certificate of Deposit) are a great way to save money for your future expenses. You also get a better rate of Interest while compared to a conventional Savings Account. Always make sure you have some cash in hand to meet your unexpected expenses else you may have to pay a fine for pre-mature withdrawal of Term Deposit.
Mutual Funds or Stocks
Investing on Mutual funds will offer great return while compared to Savings account or Term Deposits. At the same time the returns are not guaranteed and you may loose your money. Nowadays many Mutual Funds offer SIP (Systematic Investment Plan) where you save a fixed some of money on a periodical basis. This helps to mitigate the risk of losses.
Save Money from your Tax Liabilities
You can also save your money by reducing your tax burden. This can be done through eligible investments or contributions. Some of the financial products that may help you to save taxes are as follows:
a) Long Term Deposits
b) Close-ended Mutual Funds
c) Life Insurance Policy
d) Home Loan repayments
e) Pension Savings
f) Retirement Plans (IRA, 401K Plan)
If you are not aware of the tax saving investments in your area you may seek the service of a tax consultant or financial planner. These type of investments offer double benefits as they help to increase the money you have and at the same time helps to save your tax amount.
From the Investment perspective a Retirement Planning refers to the process of saving money (while working) to meet your future expenses after your retirement from job. You should start saving money for your after-retirement life right from the time when you start earning money (age of 25 to 30). If you lack a proper savings plan you may have to lead a worst life after retirement due to non-availability of funds to meet your expenses.
There are a variety of investment options available for Retirement Planning. If you are uncertain in which one to choose you may consult a Financial Consultant who would provide an ideal plan based on your age, pay scale, dependants and future plans. Some of the well known investments for Retirement planning are as follows:
IRA (Individual Retirement Account)
An Individual Retirement Account is a personal savings plan through which one could save money for his retirement life. IRA funds can be placed in Bank, Stocks, Mutual funds etc. Contributions to IRA are tax-deductible. There are different types of IRA like the traditional IRA, Roth IRA, SARSEP and Simple IRA etc.
Life Insurance policies
There are certain life insurance policies which offer money-back guarantee to the insured. This type of plan offers dual benefits as it offers the assured sum to the insured’s family members or nominee upon his death or if the insured person survives after the policy term he is paid the maturity amount along with bonus. These types of policies are usually for longer periods like 15, 20 or 25 years.
401K is a familiar retirement plan where a specified sum of money is deducted by an employer from the employee’s salary and contributed towards the 401K Plan. Contributions are tax-deductible.
Pension is a sum of money paid regularly to an Individual either by Government or super-annuation funds after his retirement or disability. The pension amount is based on an Individual’s pay scale, contributions and tenure of employment.
An Individual needs to be proactive in planning for his future especially for the life after retirement. One should consider the following to prepare a proper retirement savings plan.
a) Current Age
b) Retirement Age
c) Inflation Rate
d) Current Savings
f) Desired annual income during retired life
There are many free tools available over the Internet that can help you to calculate your retirement planning.
During your old age it is difficult to avail loans and you can’t always depend on your friends or family members for borrowing money. Hence it is advisable to save money on a regular basis which you could use at a later point of your life without any dependency on others.
Money Management is a broader term which includes analyzing your income, expenses, making use of your current resources (cash or asset) and how to achieve your financial goals. Managing money in a right way might be a difficult task for youths. You would not understand the real value of money unless you are engulfed with financial crisis. Always maintain the habit of writing down your income and expenses, liabilities, bill payments etc. Doing so would help you to pay your bills before the deadline and avoid unnecessary late fees.
It is always better to set a proper financial plan to meet your future expenses. You can set a short term or long term goal. Planning alone does not mean that you could achieve your goals you need to adhere to the plan and execute it. You could also consult a financial planner who could help you to achieve your financial goals.
Always document your bills and receipts. Check your Bank statement and credit card statement, and inform your Banker immediately in case of any discrepancy. As the technology develops there seems to be lot of fraudulent activities, we might not know unless we check our accounts with care.
Itemize your monthly expenses in a paper and then check if you have sufficient income to meet those expenses. If you find out that your income exceeds your expenses then you are doing better. On the other hand if your expenses exceed your income then you really need to work out. Either you need to increase your income or cut down some of your avoidable expenses.
Savings & Investments for future
Always develop the habit of saving a portion of your income. You can probably save your money in a Bank as a Savings Account. Savings Account has the benefit of depositing or withdrawing money at any point of time.
If you think you have enough money in hand and have set aside some money for emergency expenses, you could invest the money in Term Deposits, Mutual Funds or Stocks. Investing helps to increase the money you possess.
Maintaining Reserve for Emergency Expenses
Always make sure you have enough money set aside to meet your emergency expenses. You wouldn’t know when you might urgently need money.
Make more out of your Money
Always try to make more profit out of your money at a lower risk. If you have a fair knowledge in Stock markets you could invest in Stocks instead of the Term Deposits which offer comparatively low returns. But you need to remember that anything that fetches more profit comes at the cost of higher risk.
Loans & Credit Cards
Apply for a loan only if you really need it not just because you are eligible to receive it. Always try to clear off your debts as soon as possible or else you may need to pay more money by way of late fee or interest. Credit Card bills are a major headache if you don’t pay the full amount that is due. Interest rate for credit card is very higher than personal loans. Make sure you pay your credit card bills way before the deadline.
Avoid Lavish Expenses
If you don’t have enough income to meet your regular expenses avoid spending on unnecessary stuffs. Say for instance Tours, Movies, expensive Mobiles, expensive novelties etc.
Life Insurance is a great way to financially secure one’s family members or dependants in case of his death. Apart from this Term Life Insurance offers the benefit of money-back guarantee which means if the policy holder survives after the policy gets expired he would be paid the maturity amount along with some bonus amount.