‘A penny saved is a penny earned’. This quote rightly taps on the importance of savings. To break it down, it simply means money which is saved holds equivalence with money earned. A penny saved today will expand your financial resource tomorrow.
Best ways to grow money short term are numerous and routine. They come under saving money without investing. Hence options and tips to protect your money are going to be classified under – How to make your money grow without investment and by channeling them under right investment options. To erect a formidable financial backing, it is essential to invest smartly, for instance in less risky and tax saving investments.
Growing your money without introducing them in the pipes of investment
In this section the need for developing the habit of savings and inculcating them in your lifestyle is stressed.
It is a simple understanding; your expenses are going to be regulated according to your lifestyle and attitude. These are personal traits which differ from person to person.
Hence, to build a sound financial health the below mentioned attributes must be considered stringently and must be adopted as well.
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Dread the Debt
Accumulating debts block your flow of money and thereby your savings as well. Some people have a ‘marsh’ kind of attitude towards borrowing debts. They keep on borrowing new debts to fend off their old debts. This habit will definitely tug you deep inside the marsh and affect your financial standing adversely.
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Set an Emergency Fund aside
Ideally at least three months’ worth of routine expenses coverable amount must be saved aside for basic requirements like rent, school fee etc. Helps you stay prepared and composed in case of any financial emergency. Especially for salaried individuals who can allocate a specific amount every month.
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Devising Financial Goals
Setting up monetary goals like fund for an overseas vacation, or for further education, or for a wedding affair etc helps you save money better. The reason is you fixate a motivation in form of that goal.
How to grow your money through investments?
Once you successfully inculcate the habit of saving, you can start thinking about channeling your money in the right options. There are innumerable income tax savings to lock your money in. The most important factors while choosing an investment are: –
- Reviews
- Risk
- Return
For a first timer, you must surely seek advice from experts and people who are have their heads in the current economic and financial scenario. Gather reviews from different sources about various tax saving investments with satisfactory returns.
Initially one must always opt for low risk bearing investments which remain stable even in a volatile economic environment. One must not be a daredevil at the fresher’s phase and blow away all the preciously-saved money. So, choose wisely.
And the most important factor is returns. The purpose of exposing your hard-earned money is to gain more than the invested amount. Thus, pick decent-yielding and tax saving investments.
Government of India keeps on introducing various schemes and plans to encourage people to invest and increase the circulation of money in the economy. It helps in avoiding the stagnancy of money and dead investments.
Thus, below are some of the tax saving investments which can generate decent income as well as reduce your tax burden.
- The National Pension Scheme – By investing in NPS you are surely going to secure your after-retirement life. Apart from that NPS allows you to claim deduction under section 80C as well.
- National Savings Certificate – Introduced by the Indian Government, NSC is like fixed deposits. They are safer than FDs since they are invested in a Government’s scheme. They allow you deduction from your gross total income u/s 80C. However, the interest earned is lesser than the interest earned on FDs and they are taxable too.
- ELSS – Equity Linked Savings Scheme mutual funds is one of the popular tax saving investments. They bear higher risk although, but they yield higher returns as well. It is deductible under section 80C
- Insurance plans are also among tax saving investments. Life insurance policies and health insurance plans are deductible u/s 80C and 80D respectively.
Conclusion
Before buying a financial product or investment plan, it is necessary to know about its tax structure. But do not buy a financial product just to save tax. If you buy a pure investment or tax saving plan, the tax restrictions will be no problem as the sum assured is a high multiple of annual premium paid. When you mix your investment and insurance, this when the problems come into picture. Purchasing a life insurance plan needs a long term commitment to pay annual premium. If you have purchased a wrong product, termination of such insurance plan will lead to unintended tax situations.