The following strategy should suit most young earners:-
1. Build an emergency fund, totalling to 6 months' income and monthly loan repayments, in an easily accessible form, of say, cash, saving account and fixed deposit with sweep in facility.
2. Buy an online 10 lakh family floater health plan (excl. parents) with lifelong renewability, and specific suitable top ups when needed later.
3. Buy an online 30-year pure term insurance plan for 6 years' income plus any outstanding loans.
4. Automate online payments of all loans and debts.
5. Identify your lifetime goals like:-
a) Residential house after 5-10 years,
b) Child's higher education after 15-20 years,
c) Retirement after 25-30 years, and
d) Welfare of dependent parents.
6. Select investment products on 4 basic factors:-
a) Tenure of the investment,
b) Risk you are willing to take,
c) Returns offered by the option, and
d) Taxability of its income.
7. Suggested products are:-
a) Fixed Deposits for short-term goals, as they offer high safety and assured returns, but won’t be able to beat long-term inflation or provide adequate growth;
b) Debt Funds for medium-term goals, as they offer moderate safety with potential returns to beat long-term inflation, but may not provide adequate growth;
c) Hybrid Equity Funds or Multicap Funds for long-term goals, as they offer higher returns to beat long-term inflation, along with higher growth too, but with moderate to high risk.
d) 5-yr FDs and ELSS Funds for tax-saving purpose.
8. Having FDs alone would only suit those who:-
a) Earn at lowest tax slab,
b) Earn interest within Sec 80TTA/B limit,
c) Don't need to setoff capital gains and losses,
d) Don't mind paying annual TDS on their total investment for claiming tax refund every year,
e) Don't avail SIP, SWP and STP facility from their Debt corpus for various investment purposes.
9. For others, Debt Funds and Equity Funds will be better.
10. A few numerical tips:-
a) Save 30% min. gross annual income in earning years.
b) Invest (100 minus age) % of savings in equity products for 5-yr+ time frame.
c) Invest 10% min. gross income for a retirement corpus.
d) Spend 15% max. take-home income as discretionary.
e) Limit debt repayments to 40% max. gross income for mortgage-based assets, and 10% max. for other debts.
1. Build an emergency fund, totalling to 6 months' income and monthly loan repayments, in an easily accessible form, of say, cash, saving account and fixed deposit with sweep in facility.
2. Buy an online 10 lakh family floater health plan (excl. parents) with lifelong renewability, and specific suitable top ups when needed later.
3. Buy an online 30-year pure term insurance plan for 6 years' income plus any outstanding loans.
4. Automate online payments of all loans and debts.
5. Identify your lifetime goals like:-
a) Residential house after 5-10 years,
b) Child's higher education after 15-20 years,
c) Retirement after 25-30 years, and
d) Welfare of dependent parents.
6. Select investment products on 4 basic factors:-
a) Tenure of the investment,
b) Risk you are willing to take,
c) Returns offered by the option, and
d) Taxability of its income.
7. Suggested products are:-
a) Fixed Deposits for short-term goals, as they offer high safety and assured returns, but won’t be able to beat long-term inflation or provide adequate growth;
b) Debt Funds for medium-term goals, as they offer moderate safety with potential returns to beat long-term inflation, but may not provide adequate growth;
c) Hybrid Equity Funds or Multicap Funds for long-term goals, as they offer higher returns to beat long-term inflation, along with higher growth too, but with moderate to high risk.
d) 5-yr FDs and ELSS Funds for tax-saving purpose.
8. Having FDs alone would only suit those who:-
a) Earn at lowest tax slab,
b) Earn interest within Sec 80TTA/B limit,
c) Don't need to setoff capital gains and losses,
d) Don't mind paying annual TDS on their total investment for claiming tax refund every year,
e) Don't avail SIP, SWP and STP facility from their Debt corpus for various investment purposes.
9. For others, Debt Funds and Equity Funds will be better.
10. A few numerical tips:-
a) Save 30% min. gross annual income in earning years.
b) Invest (100 minus age) % of savings in equity products for 5-yr+ time frame.
c) Invest 10% min. gross income for a retirement corpus.
d) Spend 15% max. take-home income as discretionary.
e) Limit debt repayments to 40% max. gross income for mortgage-based assets, and 10% max. for other debts.