May 1st is celebrated as International Workers’ Day across the World. A worker is defined as an individual who dedicates time on a regular basis for servicing requirements of the employer. All employees are considered workers.
The workers’ day is observed annually to celebrate achievements of workers. The main purpose of celebrating workers’ day is the unfair treatment of the working class over the years. International workers’ day was first celebrated on 1st May 1886 at Chicago, USA.
Individuals falling in the working class have a fixed income. It’s extremely important for them to have a proper financial plan. A proper financial plan addresses strategic spending, savings and investments. Most of these individuals are capable of coming up with a good plan. They can save a fair bit of their income on a regular basis, but where they fall behind is when it comes to investments. With a wide range of options to choose from, they are in a state of confusion.
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Following are key investment strategies for the working class:
EPF is compulsory for salaried employees. Employee’s Provident Fund (EPF) is a government backed savings scheme under which a certain percentage of your basic salary is deposited into your EPF account. The employer too makes a contribution to your EPF amount. Money deposited in the EPF account grows with time as it earns an interest which is much higher than that of a normal savings bank account or an FD. You can withdraw EPF to fund various life events, provided you meet the eligibility criteria.
You can enhance the benefits of EPF by increasing your EPF contribution, but the employer’s contribution would remain the same. This is through voluntary provident fund (VPF). Withdraw the EPF at retirement. Money in EPF account stops earning interest when you retire or when it doesn’t receive deposits for 3 consecutive months.
Mutual funds are one of the most sought after investments, as they offer a diversified portfolio. In short, mutual funds can be your one-stop financial plan. SIP is becoming one of the most preferred ways of investing in mutual funds.
SIPs allow you to invest a fixed sum into your mutual fund scheme each month rather than investing a lump sum. The best part of investing in mutual funds via SIPs is you can invest with just Rs 500 a month.
Investing in the NPS is a great way of retirement planning. Any individual in the age bracket of 18 to 60 years is allowed to invest in NPS. The best part about investing in NPS is that it allows you to choose the contribution amount and frequency.
NPS gives investors the option of choosing the fund manager. The contribution towards NPS account is eligible for tax deductions as per Section 80C of the Income Tax Act, 1961.
For conservative investors, RD offers a much better option than Fixed Deposits (FDs). RD is an alternative for those investors who want to invest in FD but don’t have a sizeable lump sum. Under RD, you deposit a fixed sum on a regular basis. Investing in RD compels you to save. RDs are a great option for investors and they offer guaranteed returns with almost no risk.
A financial plan is incomplete if it doesn’t cover emergencies. You must avail sufficient health insurance in order to keep medical expenses at bay. With right medical insurance, you have yourself and family members covered against hefty medical bills. In this modern world of uncertainty, you never know when you catch a disease which leads to hospitalization. With right health insurance, you can avail cashless hospitalization or pay up-front and then get your medical expenses reimbursed. If you don’t have a health insurance plan, then your bank account could be drained.
If you are the breadwinner of your family, then just saving and investing in the right investment schemes is not enough. They don’t substitute income when you are not around, and your dependants’ future would be in jeopardy. A term life policy compensates for the loss of income to the family when you are no more. A term policy secures your life over a fixed tenure. You must pay periodic premiums in order to keep the policy active.
On an unexpected demise within the term of the policy, nominees get the sum assured. If you are the breadwinner of the family, then you must consider availing a term life policy. Proceeds of the term policy received by the beneficiary are completely tax exempt. The premium paid towards term life policy is eligible for tax deductions under Section 80C of the Income Tax Act, 1961 up to Rs 1.5 Lakhs a year. The best part about term policies is that you get high coverage at low premiums.
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