9 ways to use credit card properly!

A financial plan is vital for a secure future. Money9 offers a 9-point guide for a smart financial plan for a higher return.

We generally do the other way round – give more priority to spending save whatever is left of the disposable income.

Savers are those who give priority to saving and then spend accordingly. Suppose you earn Rs 20,000 per month. You have to first put aside an amount for investment, say Rs 5,500, and spend the rest throughout the month.

Do not plan to save money after keeping aside the money for expenditure. Advisors say that way you would tend to burn your entire income and very little, if at all, would be left for investment.

Emergency fund

The Covid-19 pandemic have made us understand the significance of emergency fund. Everybody should create an emergency fund that he/she can tap into in times of sudden emergency.

This can be of immense use if confronted with job loss, wage reduction medical emergency.

Proper portfolio

One should keep a perfect balance of investments in debt, equity, gold, real estate and others. Experts say that one should take maximum risk if he/she is in the twenties, thirties and forties bracket.

One should maintain the portfolio and for right allocation depending upon his/her profile, should take advice from experts. The optimum ratio of a person in mid-thirties should be 20:70:10 between debt, equity and gold/real estate, suggest experts.

Term insurance

As a thumb rule, you should have a life insurance cover of at least 10 times of annual salary. The policy sum should be able to take care of your liabilities and the financial needs of your dependents in your absence.

“Insurance is not for tax saving. It is not an investment. Insurance needs also keep on changing according to the age of the policy holder,” said Arvind Agarwal, an income tax professional.

Health insurance

Health insurance policies help a person to get treatment for a number of diseases. It is very important to make arrangements for defraying rising medical costs that would otherwise erode savings and investments.

According to age and need, everybody should have a comprehensive health insurance policy, advise experts.

Goal-based

Experts generally advise investors to follow a goal-based approach to investing. Every investor has different goals with tenures and invests accordingly to achieve those goals. The goals could be investing for retirement, child’s higher education, purchase of a house or flat, holidaying, purchase of vehicle or any other goal like saving for charity, house renovation and others.

Right asset class

Once you have defined your goals, you need to look for investment avenues. Every person has to choose an asset class for investing based on his/her risk profile, risk appetite and time in hand to reach a particular goal and invest accordingly.

Review existing investment

It is important to keep a track of investments, review it regularly, at least once a year and make changes if required, experts advise. The review is needed since one’s situation and responsibilities might change with every passing year.

Regular review will keep the person updated and he/she would have a clear idea about the investment portfolio.

Nominee

Always try to enlist a nominee in every saving instrument, besides you should keep at least a person well informed about all the investments. If any mishap happens at any point of time, the second person will take care of your investments, advises Nilotpal Banerjee, an investment planner.

This person ideally should be the partner or any close and reliable person of the investor, added Banerjee.