There is never a bad time to step back and review how well you are able to manage your personal finances. Even if you have set your budget and are strictly following it, it is easy to miss out points that can save you some extra bucks or can amplify your savings. Let’s discuss some of the proactive steps you can take to maximize your earnings before your next salary hike.
As an investor, you must always opt for a mix of financial products to have a healthy investment profile. In case you are only investing in FDs, then step back and think, whether or not you are missing out some better return generating investment options. You need to diversify your investment options to reach your financial goals. If you are looking for saving money for a period of five years or more, then you can choose to invest in mutual funds. You can also look for other alternative investment options like a recurring account or a high-interest rate savings account such as NSC or equity-linked products. You can also find money market accounts that offer good rates of interest. This will not only help you to save monthly but will also amplify your saving and give you greater returns.
Savings do not come naturally. One has to nurture the habit of saving responsibly, only then he/she can save efficiently. The first step towards saving money is to figure out how much you spend. Keep track of your expenses. Once you have the data, try to categorize it and create a budget. Your budget should outline how much of your income should go towards your necessities and how much should be used for other investments. Here you can identify the non-essential expenses that you can spend less on. Consider money put into different saving or investment options to maximise your earnings. You can also maximise your earnings by saving on the taxes from your taxable income. Listed below are some of the ways through which you can maximize your earnings:
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Home Loan: a home loan comes with multiple tax benefits that significantly reduce your tax outgo. A tax deduction can be availed on housing loan for the interest you pay towards the loan. The interest you pay towards your home loan can be claimed as deduction from your total income, up to a maximum of Rs. 2 lakhs under section 24. The principal portion of the EMI paid for the year can also be claimed for deduction under Section 80C. The maximum amount that can be claimed is up to Rs. 1.5 lakh per year. If the home loan is availed in a joint name, then each of the loan holders can claim a deduction of Rs. 2 lakh along with deductions under section 80C.
Education Fee: you can avail additional tax benefits on your child’s tuition fees. This is because tuition fees qualify for tax benefits under section 80C of the Income Tax Act. The parent who pays the fee can claim the tax exemption and the benefit can be availed for a maximum of two kids. Only the tuition fees can be claimed for tax exemptions; additional fees like development fees or donations do not qualify for any tax benefits.
Provident Fund: EPF is a retirement benefits scheme that is availed by salaried employees. The benefit of saving money in EPF account is that you can receive tax benefits on it. Your contribution is eligible for getting you a deduction of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act. The money that you accumulate in your EPF, the interest earned and the money that you will eventually withdraw after the mandatory specified period (5 years), all are exempt from Income Tax.
Interest on Savings: if you have surplus cash, then you can make use of it to earn some extra money by investing in interest-bearing saving schemes. Don’t keep idle money in your bank savings account. Rather you can invest it in some interest-bearing deposit like fixed deposits, bonds or Post Office Monthly Income Schemes (POMIS). If you want to generate a monthly income, then you can opt for monthly income schemes. Currently, this facility is offered by both banks and post office. Else you can park your money in fixed deposit which allows your principle to grow due to the compounding of interest.
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As a consumer, you must compare and carefully evaluate the rate of interest offered by different banks. Consider all the investment options available in the market and find out which investment would suit your profile. If you like to take the risk, then you can opt for mutual funds or equity-linked products. If you want to invest in low-risk products, then go for FDs or NSC. A good investment scheme will help you fulfil your financial goals early. If you have finalized on the investment option, then find out which bank pays good interest rate along with suitable terms and conditions that would meet your requirements. Prioritize your family needs and your financial standing before making a big investment. Also, consider putting money regularly in health insurance or term policy that would cover your misfortune strikes.
Remember a good investment profile will not only make you financially stable but will help you remain well prepared for any sort of emergencies.
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