A Few Tips On Money Management

A Few Tips On Money Management

2019/02/25

How can I manage my money ? This is a million dollar question being sought after by many youngsters who start earning. Learning about basic financial management helps in becoming financially literate and proves handy in managing  one’s income.

Money Management Tips

Knowledge of Basic Tools of Investment

One can invest in either debt investment or in equity investment. Debt investments include provident fund, fixed deposits and bonds. Assured interest amount is a guarantee in this. In equity investment anticipated shares of a company can be bought. One can also get a part of profits as dividends. To minimise the risk in investing in shares, atleast Rs. 50,000 is required, so for starters investing in mutual funds policy that diversifies the invested money in various companies and sectors is a good option. Staying invested in equity for 2-3 decades can benefit by great returns.

Don’t Invest Just to Save Taxes

Investing money just to save taxes is not an intelligent option. As the taxes today  are reasonable and meaningful, tax saving comes naturally on proper execution of ones financial responsibilities like taking home loans, educational loans, life insurance premiums, medical insurance premium and saving for retirement through EPF OR PPF. All forms of investments come along with transparent or opaque risks like fixed deposits are a good short term option because of inflation rate while equity shares are less risky in long term, so tax saving must be done with wise investment.

Insurance is Not an Investment

Most of the young people have wrong presumptions about insurance. Insurance policy is a good option of tax saving but buying a right and suitable insurance policy matters otherwise you might spend everything you earned on unsuitable insurance policy. Life covers should be only taken if you have some dependents on you or if you have large debts like a housing loan to pay off. Also before committing yourself to any insurance plan you must know about term-insurance plans and unit-linked insurance plans. Term insurance plans offers financial certainty at the lowest cost while unit-linked insurance plans have much higher premiums and no assured returns. One should also pay heed on processing fees, service charges etc. which reduces your net fund value that is invested in the policy.

Credit Card  Usage

Using credit cards is a convenient and safe option but remember that banks don’t charge any interests, if one pays his dues every month, but they make incredible profits from the customers who revolve the credit and pay the least amount possible every month. Most credit cards charge up to 2.95%interest per month. So if anyone has made purchases worth Rs. 20,000 on  credit card and paid the minimum 5% of it every month then it will take 11 years for him to pay it off with Rs. 24,000 as interest amount.

So, it is advisable to come out of this vicious circle of credit card debt even if one has to take personal loan which is still cheaper. Besides this, most of the credit card users remain unaware of accident and disability insurances offers of their credit cards thus not availing them at times of need. This will also help in investing in some other insurance policy with different coverage. Also, one should not forget to keep a track of his credit card statement.

Certified Financial Planners (CFP)

Instead of relying on insurance or mutual fund agents for advice, CFP’S are the right persons who can help  to manage ones funds advisably.

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