Everyone wants to be financially secure by the age of 35 to 40 years. However, this doesn't happen overnight or in a span of 1-2 years. Experts, therefore, suggest starting early with investments to achieve this goal.
With various goals in life, most young people want to ensure that they get their finances on track and their investments right before entering their 30’s. Everyone wants to be financially secure by the age of 35 to 40 years. However, this doesn’t happen overnight or in a span of 1-2 years. Experts, therefore, suggest starting early with investments to achieve this goal.
Most of us start working in our 20’s, but that’s not the time when we think about investments or savings. We live in the moment and forget about saving anything for the future. However, that’s not the right approach towards wealth creation. You need to follow certain strategies to ensure that you are on the right track with your money and also financially secure for the future.
Here are 5 investments that you should make before entering your 30’s:
1. Tax-saving investments: With proper tax planning, taxpayers will be able to reduce their tax liabilities as well as save more, which can be invested for other goals. Taxpayers should assess their tax liability and take advantage of tax deduction available under Section 80C of the Income Tax Act.
Equity-Linked Savings Scheme (ELSS) is one of the best tax-saving instruments which is an open-ended equity mutual fund. With ELSS, investors can avail a deduction under section 80C up to Rs 1.50 lakh in a financial year.
2. Emergency corpus investment: Most think we are prepared for any emergencies, but events like sudden illnesses, accidents, and other unforeseen events can hamper one’s finances. In critical cases as such, one can even lose one’s earnings for a few months or even years. To take care of such a situation, it is advised to build an emergency corpus. The emergency corpus, to start with, can be equivalent to at least 3-4 months of living expenses, which can be increased in the future.
Also, note that the emergency fund should not be invested somewhere with a lockin period. It should be liquid in nature, so that you can have access to the money immediately at a short notice. For this, you can put your money in options such as liquid mutual funds or savings bank account.
3. Long-term investments: Long-term goals include retirement, buying a house, marriage, staring own business, world tour, etc. For such long-term goals, one needs to save from an early stage, and determine how much time, money and investment towards each goal are needed. Once you find out how much you need for a goal, you can start investing for your goal, at a regular interval.
You can start with fixed monthly investments – SIPs (Systematic Investment Plan) in mutual funds. Investments in equity mutual funds (growth-oriented) are one of the best investment options for long-term goals. Note that, with investments in equity mutual funds, the longer time your money is invested for, the more you will benefit from the power of compounding.
4. Short-term investments: Short-term goals include yearly vacation, or buying an asset or a car, etc. in the near future. Experts suggest for such short-term goals, investors should avoid bank savings account and put their money in liquid or arbitrage funds. With investment in mutual funds, the investor can choose from different funds with different time horizons. Also, investments in mutual funds are more efficient than a savings account.
For goals with a time horizon of 1 year, investments in liquid or ultra-short term funds are ideal, whereas arbitrage funds can be looked at for goals that need to be achieved post 1 year.
5. Health and Life cover investments: Both health and life insurance covers are important and should be considered by an investor while planning his/her finances, before turning 30. While health insurance cover is a necessity for all, life insurance cover is needed if you have a family dependent on your earnings. Experts suggest investors must assess and opt for the right life insurance cover for themselves. While choosing a health insurance cover, choose one depending on your needs and after considering all options available.