People have a wide range of aspirations throughout their lives. Most of these goals turn out to seek financial support in order to achieve them. And one works really hard to accomplish these aspirations. But people sometimes realize that merely working hard does not result in the desired financial position. While we toil everyday to build wealth, we might end up spending too much, inflation might wipe away a portion, economic shocks could result in a crisis, and a lot of other factors could be counterproductive. In order to live a happier life and unlock the goals set by us, we ought to follow a few practices and make some relevant investment decisions. The following suggestions could help for the same.
- Most of us dwell in the thought that what difference could small savings make. However, we must realize that the small values saved over a long term, could build a corpus which we usually underestimate. This is mainly due to the power of compounding that our long-term investments have. So, beginning to save early, would provide us enough time to build a fortune by means of compounding.
- Learning to plan our taxes is an inevitable task that could save a significant portion of our income. For example, there are a list of options which could deduct up to Rs 1,50,000 from an individual’s taxable income. Also, National Pension Scheme benefits the investor choosing it to save up to Rs 50,000 from taxable income, in addition to the social security it provides.
- Clearing off the debts is another imperative measure one has to take. One could have obtained debt at different stages of life in the form of credit cards, education loans, housing loans, etc. Unless all these debts and payments are paid off, one cannot claim to be financially independent. It is wise to categorize these debts based on the priority & interest expenses incurred over them, and set an expected time to clear.
- Getting covered under health insurance is also highly underrated. We often miss to foresee the economic burden that one could experience in case of an unexpected medical expense. Moreover, opting for health insurance at a young age could provide the benefit of paying lower premiums.
- Diversification of investments provides the hedge against economic shocks. While we might look for high-return investments to beat inflation, we are more likely to choose risky asset classes. Diversifying the risk by investing in different securities would save us from unexpected crisis. Just like investment, it is important to diversify our income source as well. More than just relying on a single source of income, it is beneficial to look for a side business. In addition, we could make avenues for passive income in the form of interests and dividends.
- We are most likely to make impulse purchases and overspend right after our payday. In order to stop us from incurring such expenses, budgeting would be very helpful. So, we must make it a habit to make budgets and record our everyday expenses to save the money which we spend easily.