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Wealthy Wednesdays: How to make your money work for you?

Let your money grow, even as you do, says Parvathi Krishnan, an ex-banker

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When it comes to growing your money, there is no magic and there are no secrets. To start building your fortune, you don't have to work three jobs. You just need to invest early and invest wisely.

Let's start with the first salary. Since it is a first, do what you will—feel empowered, splurge on yourself, upgrade your wardrobe etc.

Thereafter, what matters is your responsible financial behaviour.

1.Transfer a portion of your monthly surplus to a Recurring Deposit (RD) account in your bank. With netbanking features, this is just a click away.
The effort comes with two benefits—you restrict your spending, and in a year's time, an allocation of Rs.8000 would have grown to more than a lakh of rupees. And you would have surmounted the first roadblock in financial decision -making.

2.Create a Fixed Deposit, with your bank. Keep aside some funds for emergency situations.

3.Start a Public Provident Fund (PPF) account. In a year, you can invest a maximum amount of Rs. 150,000 to get tax benefits. It should not matter that the account has to run for 15 years. It feels like just yesterday, that one was a toddler, doesn't it? Time flies. Besides, once a PPF account is started, you don't have to think too much about other investment avenues, each year, for saving on tax. The amount you invest is extremely flexible, even Rs.1000 a year is sufficient to keep it going during tough times. The interest you earn is tax free.

These simple measures direct us to saving as a way of life. And now, we can look out for means to improve the returns on our saving efforts. The greatest drain on our savings is inflation. In order to earn more, learn more—particularly about Mutual Funds and Stock Market investments. You don't need to be an expert. Seek a trusted adviser and choose 2-3 schemes. Invest in lump-sum or choose a regular investment path through Systematic Investment Plans (SIPs). As you watch the pattern of growth of your portfolio, become more informed so as to be able to channelise your future investments appropriately. It pays to improve our knowledge of finances.

Agreed, everyone is in a hurry. But, certain results need time. Returns are not assured, but, mutual funds, with their expertise, should be able to deliver much more than what is eaten away by inflation. Dividend payouts from Mutual Funds are tax free at the hands of the investor. Long term capital gains benefit also accrue.

Higher returns always carry with them the burden of higher risks. If you have the appetite, invest in stocks directly in the market. It won't hurt to step back a little to get an overview before taking the plunge.

Life Insurance products are recommended especially when there are financially-dependent members. But a medical insurance is a must, given that treatment for lifestyle illnesses cost a bomb.

Invest in gold—it's a hedge against inflation. But you do not have to go overboard and hoard gold, at home. It's unproductive. You can choose to invest through gold funds.

Also consider, the National Pension System (NPS)— a scheme which through regular monthly contributions of up to Rs. 500 can be converted to annuities when it is time to retire.

In the early years, let career matters take priority. You can afford to exercise caution with financial products that are unfamiliar or need extra attention. The aim is to achieve financial security. Spread your wings as you gain confidence and be venturesome. In mid-life situations, you need to reassess whether the investments are progressing the way you want them to, so as to take corrective measures. All the aforementioned options are applicable at any life stage. Difference, if at all, arises because of the change in our risk appetite. The earlier one starts saving, the benefits accruing will be that much more.

 

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