Manage your finances with these things in mind
Whether your income is high or low, managing your finances in an optimal way is very important. Its best to think about savings and investments from a very early age, not just in savings accounts and fixed deposits but also in mutual funds, stocks and shares. The earlier you start the more return you will get on your money.
The following two steps will help you go about the process in a smooth way:
Assess your cash flow: Chalk out a plan first. See how much money you can actually set aside after deducting all your expenses from your income. Once you arrive at a figure, it will be easier for you to make a savings and investment plan.
Consult a specialist: Once you have zeroed in on the amount of money you can use for investment, consult a person who has considerable knowledge about investment. You can even seek help from institutions such as IDFC Bank that have a gamut of savings and investment products, right from simple savings accounts to fixed deposits and recurring deposits, and even mutual funds. Banks can guide you on how to build your portfolio and get the maximum out of your hard-earned money.
Fixed deposits versus mutual funds versus a savings account
Whether you are a salaried professional or a self-employed individual, having a savings account is of utmost importance. There is no point in keeping cash idle in your lockers.
While most banks give about 3.5 per cent interest on money parked in a savings account, institutions such as IDFC Bank give you up to 4 per cent interest on savings deposits. Though the return may seem less compared to fixed deposits and mutual funds, the biggest advantage of savings accounts is liquidity.
You can withdraw or deposit cash whenever you want to in a savings account.
Fixed deposits come in handy when you have lump sum cash.
Suppose you got a huge Diwali bonus or an old property got sold, or you inherited a generous aunt's life savings. What do you do with that money? Make a fixed deposit of course. These days, while most banks are offering 7.25 per cent interest on fixed deposits, IDFC Bank gives up to 8 per cent interest rate on fixed deposits. The money is parked with the bank for a minimum of 7-46 days and a maximum of 10 years. Upon maturity, the principal, alongside the interest, is credited to your bank account.
Some banks charge you on early withdrawal but IDFC Bank doesn't charge any penalty on early withdrawal. Sounds like a great plan already, doesn't it?
Mutual funds, too, yield high income if invested on a long-term basis. They can give you on an average 10-12 per cent return. You don't need a lump sum for this, you can invest in mutual funds whenever you wish to, say every month, and start from as less as Rs 500. The amount invested every month needn't be the same either, and unlike recurring deposits, there is no fixed date as well. Mutual funds give you a lot of flexibility. Besides, there are also tax benefits under section 80C which you can garner out of some.
You can consult your financial advisor or officials in institutions such as IDFC Bank, who can guide you on each mode of investment. Depending on your cash flow - periodic or lump sum - you can take your pick according to your convenience. There is no point in leaving money idle at home. Save, invest and multiply your earnings and live like a king not only post-retirement, but even in your 30s and 40s.