“There are people in the world so hungry that God cannot appear to them except in the form of bread.” This quote by Mahatma Gandhi explains how poverty can be a huge burden to deal with. Eradication of poverty is one of the 17 sustainable development goals to be achieved by 2030. India seems to be on the way. 2019 Global Multidimensional Poverty Index illustrates the upliftment of 270 million poor in India between 2006 to 2016.
Financial prudence is the key to ensuring that you have enough savings to lead a comfortable life and the International Day of Eradication of Poverty is a jarring reminder of that. If you follow a few golden principles of financial planning to the T and take control of your earnings, you might never have to see a day when your wealth erodes, leaving you in the lurch. Here are a few:
1. Pay yourself first:
Your employer is paying you, but are you paying yourself? Ever since Sudhir started earning, he always made it a point to keep aside some of his monthly salary in a fixed deposit. According to this financial rule, you should remember to save at least 10% of your monthly income towards retirement. Keep increasing this amount with the corresponding increase in your income. Don’t assume that expenses will come to a standstill when you retire, plan for any eventuality.
2. The 10-5-3 rule:
This is a basic rule of investment. It outlines the returns you can expect from different asset classes on an average. For instance, when you invest your money in equities, in the long term they can give you close to 10%. On the other hand, you can enjoy a minimum 5% return on investments in government bonds and securities. While cashlike accounts such as a savings account will grow at 3% per annum.
3. 100 minus your age rule:
This financial rule can come in handy if you are confused about how to allocate your assets. All you need to do is subtract your age from 100. Let us say you are 30 right now. So while you can invest 30% of your savings in debt, 70% should be in equities. The younger you are the more you should invest in equity as per this rule of investment This percentage ideally should decrease with age as your corpus builds so that you can savour it in your old age. Unit linked insurance plans help you do just that since they allow for switches between debt and equity funds as per your convenience. Reap the benefits of equity in your 30s and switch to debt as the maturity of your ULIP nears. Simple!
4. Emergency fund:
Always remember to be prepared for a situation that demands money at a short notice. It could be an accident or a medical emergency. Keep 3 to 6 months of your expenses in a savings account as a financial rule, so that should you be faced with such circumstances, you have enough to last yourself till everything is back to normal.
5. Life insurance:
One of the most important principles of financial planning is knowing how much life cover you need. It should neither be less nor more. You should ideally have a life cover that is at least 10 times what you earn in a year. ULIPs are a great option if you are looking for an instrument that combines both insurance and investment; you handily take your pick from the Child plan, Retirement plans and Investment plans, available on Finserv MARKETS, for a plan that suits just your needs. Although these are market-linked, they give you the flexibility to choose between equity, debt or both depending on your preferences. You can also opt for riders as per your choice for additional protection to your life insurance in ULIPs.
6. Saving for retirement:
You might not be aware of the expenses that you would incur once you retire. It is important to build a retirement corpus that is 20 to 30 times your current annual income as a rule of investment. You need to account for rising inflation when you work out how much you need to save today to retire comfortably say 30 to 40 years from now. ULIPs being long term investments help you build your retirement corpus in your working years.
Keeping these principles of financial planning as your guiding light will help you avoid pitfalls in your life. For wealth creation over the long term, creating a retirement fund or for your child’s education, ULIPs available on Finserv MARKETS can also be a good choice. They offer you flexibility in terms of choice of funds and are tax efficient too.
You can switch between debt and equity among a bouquet of choicest funds as per your convenience. What’s more, you also have the advantage of life cover along with investment. Take steps towards financial empowerment by making the right decisions to avoid falling into poverty. After all, you are the captain of your own destiny, you are the master of your fate.
Also read in detail about the ULIP tax benefits you can avail with various investment plans available on Finserv MARKETS
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