Are you planning to begin your investment journey? Do you wish to secure your financial future and meet your monetary objectives but do not know how to invest money in different instruments? Do not worry, as we have listed the essential things that you should do before you start investing.
- Avail life insurance
Buying life insurance is the need of the hour, as the hectic work schedule, improper lifestyle, and poor eating habits are taking a toll on human health. Life insurance can be useful in meeting the financial requirements of your dependents in case something untoward happens to you. It helps to maintain the lifestyle of your family members during your absence. Insurers offer various options in life insurance plans. It is advisable to opt for a term plan along with add-ons, like an accidental death benefit and critical illness cover. A life insurance policy is a tax saving investment. As per Section 80C of the Income Tax Act, 1961, the premium paid towards life insurance is eligible for a maximum deduction of INR 1.5 lakh.
- Set aside an emergency fund
A contingency fund is a sum that is kept as a reserve for any urgent monetary requirements. As you know, emergencies come announced. Therefore, it is essential to take the necessary precautions to avert such problems. Such a fund can prove handy to pay for unexpected expenses that can arise due to hospitalization, loss of a job, or personal needs. Before you start your investment journey, you must keep a part of your income for unforeseen urgencies. Remember that this fund’s value should be at least thrice your monthly salary.
- Have a budget and know your cash flow
Maintaining a balance between your savings and expenses is critical to have a steady financial future. Therefore, note down all your monthly costs and plan them carefully. Remove the unwanted things from the list and try saving even the smallest amount wherever possible.
Besides this, you must know your inflows and outflows properly to ascertain how much money you can afford towards the investment. Apply the necessary mathematical formula: ‘Income – Expenses = Profit.’ Here, the inflow of funds or income includes earnings from the job, business, and other sources. Conversely, expenses will include things, like your house rent, groceries, medical bills, transportation expenses, and household expenses, among others. After ascertaining how much you can afford to invest, it becomes important to finalize the investment instruments and amount. Selecting the right instrument can help you earn a high return on investment.
- Get health Insurance
Most salaried people’s deskbound work culture can cause various health issues in the long run. As you know, the cost of hospitalization can hamper your bank balance. Thus, it is advisable to invest in health insurance to cover the expenses occurring due to an unplanned medical problem. In the corporate world, most companies provide health insurance cover to the employees. However, you can lose such benefits if you switch your job. Health insurance plans cover the costs like daycare procedure and pre-and-post hospitalization expenses, among other overheads. So, purchase a health insurance policy that offers wide coverage. Also, ensure that all your family members have a health insurance plan. If you wish to insure your entire family at an economical price, opt for a family floater health insurance plan instead of an individual policy. If you have elderly parents, buy a separate health policy for them. Just like life insurance, health insurance is also a tax-saving investment.
Before starting your investment journey, it becomes vital to strengthen your financial condition first and then invest the extra money you have to meet your long-term financial goals. When considering an investment option, select an instrument that you can help you earn a good return on investment.
Hemant Kumar is a project manager at Tridindia with more than nine years of commendable experience in writing about LMS, translation, and IT. His unmatched talent and passion for digital marketing gave him the opportunity to work as a multi-tasking project manager at TridIndia’s sister company, Link Building Corp. Today, he contributes to the world by imparting knowledge on SEO, link building and internet marketing etc., that helps business owners grow their online business.
