If you are a salaried employee seeking a good financial plan for managing your hard-earned money and creating wealth then this post is for you.
As salaried individuals, we receive a limited monthly amount to set our budget and manage our expenses, and with rising inflation, it becomes extremely difficult to plan any investments or savings. What we require at this point is correct guidance and apt tips that would help us in our financial planning.
A proper financial plan accelerates saving and helps in wealth creation, here we discuss the top five tips advised by the most affluent financial planners from across the globe that would help us in proper financial planning especially formulated for salaried employees.
- MONTHLY BUDGETING :
The first and foremost step to hedging unnecessary expenses is to maintain a journal and jot your expenses down. Plan your entire budget for the month by dividing expenses into three main categories that are:
- Needs
- Wants
- Savings
Cutting down on unwanted expenses such as lavish shopping sprees, fancy dining, and inconsequential subscriptions, one can save enough. Furthermore, understand your expenses and disperse them in their respective categories of requirement. For instance, vital essentials such as food and electricity come under needs whereas outings fall under wants. Your savings include the sum you set aside for future and emergent utilization. Good budgeting means good planning.
- OPT FOR TAX BENEFITS:
A tax benefit is a boon in guise. It can be claimed only when you have opted for allowance and incurred the expense as per the Companies’ policies as well as if you have gone for the old regime. Under discrete sections employees can claim a maximum of up to 50% of their basics as per the income tax act. Some of the following are listed as follows:
- Housing Rent Allowance
- Employers Provident Fund up to 12% of Basic
- Meal Card up to INR 26,000
- Leave Travel Allowance
- ELSS or Equity Linked Savings Schemes
- Deduction For Medical Premium
- Reimbursements
One can cleverly make use of such benefits and ripe the seeds of hard work.
- PREFER INSURANCE OVER LOSS:
What hinders a salaried person are the risks that he undergoes after earning and putting the money to use. He is prone to the inescapable clutches of doom and catastrophes like accident, illness, job loss, and heavy debt. While earning at whatever stage of your life, the primary thing to be done is to secure health, life, and term insurance policies. Because they ensure a sense of dependability and reliability in need.
Life Insurance Policies are by far the most popular form of insurance scheme preferred by the masses.
Term plans are the purest form of life insurance that supplements coverage at a fixed rate of payments for a limited time. With affordable premiums and coverage for longer durations, it spares mental peace to salaried employees since it protects their dear ones without perturbing their pockets.
Health Insurance policies are also very important when it comes to securing your family and loved ones. Medical expenses are uncertain and uncalled for and they could entirely upheaval your plans and mess with your savings. Hence it is an extremely intelligent move to opt for Health Insurance
Furthermore, it is an intelligent move to put your hard-earned money into a life insurance policy since it is as sound as a dollar.
- INVEST SMARTLY:
It is truly quoted that ‘earn right, invest right’. For an employee, his salary means the most crucial asset for him since it produces another source of income, funds retirement, and gets him out of a financial plight. For him, to invest in a puny and trivial thing would hurt him the most. So what to do? The most prominent step would be to invest in safer choices and then leap for the higher ones. Out of so many ways some are as follows:
- High yield savings accounts –
It works well for those needing money in a short time and who avoid the risk of not getting their money back. Such accounts pay interest on your cash balance and you can earn higher rates at online banks.
- CDs (short-term certificates of deposit)-
These are issued by banks and offer higher interest rates as compared to savings accounts. A short-term CD is best when you expect rates to rise, for it allows you to reinvest at higher rates when the CD matures. It works well for risk-averse investors who can hold up their cash in exchange for a bit more yield.
- Dividend stock funds-
These are the portions of the company’s profits paid out to shareholders. With this, you can gain investment for the long term as well as earn cash in the short term. It is good for those looking for income and can stay invested for longer periods of time.
- Mutual Funds
A mutual fund is a financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds, and other securities.
- A systematic transfer plan Mutual Funds
STP allows you to periodically transfer (switch) a certain amount of units from one mutual fund scheme to another mutual fund scheme of the same mutual fund house. You may consider an STP from an equity scheme to a debt scheme or vice versa depending on the market conditions.
- SETTING GOALS FOR SELF:
This has to be downright one of the most important pieces of advice as well as planning for salaried employees in India. Setting a goal for self and then achieving it assists in allocating the necessary funds and gives a limpid understanding of our earnings. There are three types of financial goals-
- Short-term goals 1-3 years
- Medium-term goals 5-8 years
- Long-term goals 8-15 years
The primary goal should be to start saving early and with patience enjoy the accumulated corpus over time.
It is one’s perseverance and passion that leads one to their destination of success and prosperity. From managing money to investing, financial planning is indeed crucial in the realm of labor. These may or may not apply to each and everyone but keeping these ideas in mind one can surely make wonders and build flawless financial plans. After all, wealth is not about having money but about having a lot of options.
