Saving is important for any individual to secure the future. Every individual has an objective when it comes to savings. Some plan for higher education, some for marriage and family, and some for old age.
To have a financially secure future, here are some basic rules for savings.
Target and budget
Prepare a budget for your monthly and yearly expenses. Set a target to save a definite percentage per month. Plan your expenses to save a specific percentage of your monthly earnings. It is always advisable to set targets, which would help you save for the future and adverse circumstances.
Investment is important. Investing in a financial instrument is better than merely keeping cash in a bank account. Some investment products are traditional and risk-free while some entail high risk. It depends on the financial instrument you choose depending on your investment goals. Some of the savings plans are as follows:
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- Fixed deposits (FD)
FDs are the traditional investment schemes. An FD fetches reasonable returns; however, the money remains locked for specific period of time.
- Systematic Investment Plan (SIP)
An SIP can be considered as one of the popular investment options. If an investor is willing to take a calculated risk, this is the ideal plan. The investment is in debt and/or equity products yielding goods returns but dependent on the market conditions.
- Mutual funds
It is a good long-term investment option. Mutual funds are schemes where professionals manage a pool of funds. They invest the accumulated funds in different schemes. Mutual funds are relatively safer because of the diversified risk approach. The investments are in different schemes, which bring down the risk of losing money. Mutual funds can be considered as one of the best savings plans.
- Equity or stocks
Depending on the risk appetite of an individual, an investment in stocks can also be considered a good option. An individual may start by investing in blue chip shares, which are considerably less risky. It is recommended to take advice from the market analysts. Also, while doing so, an individual must try to reduce the risk by investing in different sectors in order to diversify the portfolio.
An important aspect to considerwhile investing is to objectify the approach depending on the investing goals and duration.
Periodically reviewing the investment is also an important aspect. The market is dynamic and keeps fluctuating. Therefore, it is important to review the investments on periodical basis and make modifications depending on the situation.
Avail of an insurance cover
Insurance is one of the most important investment options. It not only helps in case of emergencies but also acts as a tax saving scheme. A comprehensive insurance cover with affordable premium could be an important asset.
To save on taxes, it is important to invest in tax saving schemes. It is advisable to plan early and invest early. Investing at the end of the year means losing out on the returns, which you would have reaped by the end of the year.
Adequate savings would give a strong foundation to an investment goal. Thus, spend wisely and invest wisely to enjoy long-term benefits.