Using the money to spend and invest wisely could set the tone for an improved financial portfolio for the future
Your first salaries for the fiscal 2017-18 will be paid out within the next few days. Spending and investing the money wisely could set the tone for an improved financial portfolio for rest of the year, and also for the long-term.
“Starting early and being consistent with investments is the best way to build assets and wealth,” says Anil Rego, CEO & Founder of Right Horizons Financial Services.
Rego provides some tips on how to prudently use your first salary:
Money moves you should make
Even before your salary is due, make sure the tax deduction investments for the year are planned and submitted to HR. This will help smoothen cash flows through the year
#Prepare a budget for each month of the year. Some months, especially marriage, festival and vacation seasons are more expensive than others. Let provision for investments appear in each month’s budget, greater amounts in the normal months
#Prepare a check-list and start working on an asset list (to check out your current wealth), prepare goals for assets like a home and car, retirement and vacation. Write down what you are willing to invest each month against each goal.
#With age we realise that the most stupid investments we made were buying life insurance during the last week of March, mainly for tax saving. Work out the family’s needs and have adequate personal accident, term life and medical insurance covers.
#Ensure that all members of the family have a Public Provident Fund (PPF) account. If not, open the accounts and provide for deposits in each account during the first week of the month. PPF is a good long term investment vehicle with the highest safety and tax benefits
Money moves to avoid
#Do not delay your investment moves. It will affect cash flows late in the financial year. Making the maximum possible investments in the beginning of the year
#Do not keep retirement planning for a later date. Do not miss any possible deduction. 80C deductions of Rs 1.5 lakhs and Rs 50,000 in NPS that can help wealth creation for old age
#Do not hold on to past mistakes. It is good at the start of the year to get rid of bad investments including mutual funds at a loss, stop ineffective insurance policies and start again, sensibly. Gains on reinvesting will earn, while holding junk will continue to bleed the portfolio
#Do not put all your eggs in one basket. A careful matching of various asset classes like equity, debt, gold and realty to your particular needs will be beneficial
#Investments in the names of minors done with their knowledge are good life’s lessons for them. Show them what systematic investments and power of compounding can create
Financial planner Arvind A Rao, Founder, Arvind Rao and Associates has the following suggestions for those who do not have a financial plan yet and are prone to making ad-hoc financial decisions:
Things to do:
#Invest in tax-saving instruments under Sec 80C;
#Set aside the buffer for mediclaim premiums, if payable anytime at the end of 6 months from April or thereafter
#Make the first payment towards one’s retirement fund
#Clear outstanding credit card dues, if any, from previous year
#Set aside some money for the annual vacation for FY 17-18;
What not to do:
#Do not utilise this money for prepayment of existing loans;
#Do not splurge on extravagant gadget.
#Do not take-up EMI decisions based on April’s salary, as TDS is generally the lowest for April
Sarbajeet K Sen