Whether you are a young individual who just entered the workforce, a person in your middle ages, or approaching retirement, you must be working hard to increase your income.
However, earning without a proper savings and investment plan might not be enough to attain financial freedom. All you need is to follow some time-tested tips for disciplined investing.
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Save First
One common mistake while managing your finances is saving money after meeting your expenses. This may often lead to situations where you have no money left by the end of the month. Instead, the right way is to keep aside a portion of your earnings as soon as you get them.
You can do this by giving auto-debit instructions to your bank. For instance, you can set standing instructions to debit a certain amount from your salary account the next day of receiving your salary. The amount may be credited to a short-term debt fund or a recurring deposit.
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Create a Contingency Fund
Saving for emergencies is the bedrock on which good investment habits can be built. So, create an emergency fund that can be sufficient to meet any medical or other emergencies. If you’re wondering how much funds are sufficient, then try creating a fund that can take care of your expenses for at least six months.
Inculcate a strict habit of not delving into this contingency fund whenever you need money.
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Control Your Expenses
Start by keeping records of your expenses. You might be surprised by the sheer amount of unnecessary expenses that barge in regularly into your monthly budget. Start cutting on those unnecessary expenses. Next, create a spending plan and try sticking to it.
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Stay Debt Free
Don’t accumulate unnecessary debt. Continuously making debt repayments can seriously hinder your investment options. If you already have loans, then make it your priority to repay them completely.
While making payments for your credit cards, refrain from making the minimum due payment. Instead, always pay your credit card bills in full to avoid accumulating late fees.
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Create Multiple Income Sources
Creating more than one income source is easier said than done but not impossible. Once you are established in your profession, you can try to create a second income stream based on your areas of interest. For example, you can consider giving private tuition or doing freelance work, etc. There are sites where you can sell photographs
Once you’re successful in creating a secondary income stream, you can consider investing all of the money earned from this source.
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Get Creative
Creativity has no limits, and you can apply the same to your investments. For instance, make a personal rule to keep aside a small amount every time.
- You order something online.
- Your favourite player hits a six or scores a goal.
Further, try selling items that are no more useful to you. For instance, try selling your used car, old designer clothes, books, etc.
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Diversify Your Portfolio
The thumb rule of any savings and investment plan is diversification. Allocate your funds to diverse asset classes. For instance, you can provide proper weightage to ULIPs (Unit Linked Insurance Plans), mutual funds, guaranteed savings plans, and pension plans.
Click here to know about the different between Unit Linked Insurance Plan (ULIP) vs Mutual Funds.
Remember, investment is a journey, not the destination. So, take small but definite steps. Stick to a well-crafted plan, and don’t get overwhelmed by thinking about results. As they say, the best time to invest was yesterday. The next best is now—happy investing.
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