Read in: 2mins, Published On , 27 Jul 2017 By TT Connect
It rains three months. We use the water for 12 months. Similarly, you use 12 pay-cheques to fund 365 days and more! So, learn to harvest every drop, every paisa.
Simply earning is not enough
Let’s understand with an example of a 25-year-old:
MONTHLY INCOME Rs.40,000
MONTHLY EXPENSES Rs.15,000
EXCESS MONEY Rs.25,000
REASON No responsibility
MONTHLY INCOME Rs.65,000
MONTHLY EXPENSES Rs.45,000
EXCESS MONEY Rs.20,000
REASON Married with a 2-year-old child
MONTHLY INCOME Rs.1.04 Lakh
MONTHLY EXPENSES Rs.90,000
EXCESS MONEY Rs.14,000
REASON Annual school fees of Rs.6 lakh plus regular expenses
MONTHLY INCOME Rs.1.67 Lakh
MONTHLY EXPENSES Rs.1.4 Lakh
EXCESS MONEY Rs.27,000
REASON Annual school fees, tuition charges, overseas vacation, regular expenses
MONTHLY INCOME Rs.2.7 Lakh
MONTHLY EXPENSES Rs.2.5 Lakh
EXCESS MONEY Rs.20,000
REASON UK university fees of Rs.18 lakh per annum, child’s maintenance cost of Rs.1.2 lakh along with regular expenses
MONTHLY INCOME Rs.4.3 Lakh
MONTHLY EXPENSES Rs.1 Lakh
EXCESS MONEY Rs.3.3 Lakh
REASON Overseas vacation of Rs.10 lakh; maintenance costs of Rs.1 lakh per month; other regular expenses
The above table does not include costs of:
Buying a House
Getting a Car
Having a second child
Starting a company
Lending money to loved ones
Medical, other emergencies
Other goals in life
If that is added to the mix, you are likely to face a shortfall of money. So, you have to make the most of your money today. You have to save and invest
How to harvest?.
Answer: Systematic Investment Plan (SIP). With an SIP, you can invest as little as Rs.500 every month. Slowly, you can even increase the SIP amounts.
Why SIP and not lump-sum?
What is easier: Setting aside Rs.1,000 or Rs.12,000 The higher the lump-sum amount, the greater are the chances that you may delay the investment. And every year of delays makes you lose out on a lot of returns.
Do's and Dont's:
Don’t worry about large investments. You can start small and increase with salary increases.
Use SIP to build an emergency fund over the years too. This protects your savings.
Invest to save tax through SIPs. Rs.12,500 every month can help you save up to Rs.45,000 in Tax.
Have multiple SIPs in a month of Rs.500 or Rs.1,000 each. Each can be for a different goal.
Use bonuses and excess income to invest in lump-sum over and above your SIPs.
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