On this day of Ganesha’s visarjan let us see how we can aim to retire rich. One of the obstacles in this journey is the fear of investing and risk avoidance. Many people are hesitant to invest due to the fear of financial loss. This fear is genuine for most investors. Low financial literacy is one of the biggest roadblocks to investing. Knowledge is an essential asset when you're investing. So let’s try and understand the Keys to financial success.
It takes willingness to do a little reading and applying the learning. Here are eight financial rules to set you on your way.
1. To Retire Rich, Start saving Now.
This may seem like simple advice but is extremely powerful. Use the magical power of compounding to create wealth. Albert Einstein called compound interest "the greatest mathematical discovery of all time". It is the process of generating earnings on an asset's reinvested earnings. This requires two things: the re-investment of earnings and time. The more time you give your investments, the more likely you are able to accelerate the income potential of your original investment. It is never too late to invest but if you invest early, your money will get plentiful time to grow.
2. Get the Debt Saddle off your Back.
Pay off credit card bills and other high interest loans you may have on time. By paying them off, you eliminate the additional interest charges, if any, that you incur on credit cards and loans.
3. Make a Budget and Stick to it
You cannot set spending and saving goals if you don't know where your money is going. Hence you need to make a budget and more importantly stick with it. A budget helps you see more clearly how much money you earn and how much you spend and how much you save. Setting spending limits can helps you get rid of your debts, reduce spending and have more money for things that are really important to you.
4. Have a Savings Plan
Pay yourself first! If you wait until you have met all your other financial obligations before seeing what's left over for saving, chances are you'll never have enough to invest. Resolve to set aside a minimum percentage of your salary for savings BEFORE you start paying your bills. Better still, have the money automatically deducted from your salary / bank.
5. You don't need large sums of money to begin investing.
Start small. Invest in a systematic investment plan where you have to invest small amounts at regular intervals. SIPs also offer the benefit of cost averaging. An SIP plan is a good idea for an investor.
- You pay yourself first every month before you start spending
- It turns you into a disciplined investor
- It's affordable
- It helps you avoid the pitfalls of market timing
- You will be getting more units when prices are low and fewer units when prices are high.
6. Choose Equity Mutual Funds
Equity mutual funds allow investors to participate in the stock market without spending too much time tracking the markets. Diversified funds are one of the best ways to start investing in mutual funds. However, do remember that at equity funds are meant for the long term. The longer may be better.
7. Understand Taxes
At this point, you can start considering tax-saving mutual funds as well, for your Section 80C benefits. Also understand the benefits of various other tax options such as PPF, EPF, insurance and medical insurance.
8. Guard Your Health
Take daily steps to keep yourself healthy - like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking and not consuming alcohol in excess. Do this and you will avoid paying exorbitant medical bills. Remember Health is Wealth.
Disclaimer
- An investor education and awareness initiative of Tata Mutual Fund.
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