It is every individual dream to lead a financially secured life. Every living individual plan to do his or her best to provide a financially secured life for themselves and even for their family members. To do so an investor has to chalk out a plan and follow certain steps to achieve financial security.
Before knowing the steps for achieving financial security let's understand in brief about the meaning of the word financial security.
What is Financial Security?
The term financial security refers to the peace of mind which an individual feel when they are not worried about their income is enough to cover their expenses. It also refers to having enough money having been saved to cover emergencies and future financial goals.
Thus, by achieving financial security any individuals stress level will reduce allowing them to concentrate on other issues which need attention.
Let's take a sneak view of the tips for achieving financial security.
Starting early when you are young is the key to achieve your desired financial security. It is never too late to start even if you are nearing your retirement age as every single penny you have saved now will help you to cover your future expenses.
If you can save around Rs 10,000 every month for around 40 years you can easily amass a sum of Rs 48,00,000 along with the interest, this sum is significantly sufficient to lead a normal life once you get retired.
It is essential to keep in mind other aspects like asset allocation which will become even more important as one gets closer to their retirement age. The level of risk tolerance tapers down as you grow older and hence it is safer to park your funds in risk-free investments as you near your retirement age.
Invest in Tax-Deferred Schemes
Investing in Tax-Free Schemes comes up with double advantage as you will be saving a part of your earnings in a saving scheme regularly and the earnings out of it will be tax-free.
For Example: Investing in some of the funds which come under Section 80C helps individuals to get a tax rebate of up to Rs 1,50,000 per annum and the returns from them on maturity is also tax-free.
The best example for this is Public Provident Fund (PPF) and this falls under the exempt exempt exempt (EEE) category of Income Tax Act of 1961, which means, the principal amount, the interest earned on the investment and the final maturity value are completely exempt from the Income-tax thus offering the investors with triple exemption benefits.
Saving for Retirement
Building a retirement corpus fund is essential as post-retirement, the monthly earnings which an individual used to receive during employment years will be stopped. So, to achieve the financial security it is essential to prepare and work on a budget and invest some part of the earned money into retirement savings.
To plan for your retirement corpus, keep these things in mind, your current expenses, lifestyle expectations, diversification of investments, risk-taking ability, inflation rates.
Treat Savings as a Bill
One should save regularly, though it is a challenging thing to do as we all are likely to face a windfall in one or the other form throughout life. Yet one can guard the amount you wish to add to your basket from its temptation by treating your future saving as a recurring expense which is as similar to paying your home loan or paying rent. Make the habit of saving a crucial thing to secure your future strongly.
About the Author
Archana is a content writer at GoodReturns. She has been writing articles related to investment planning and personal finance for more than two years.