Time flies fast and you’ve spent the entire year without making any investments. Suddenly, March 31st is around the corner, you realise that you have neither time nor enough money to plan your tax saving... but what’s done is done. Learn from older mistakes this year. Start today and get into financial planning right away.
As the new financial year has just begun, this is the best time to plan ahead, and take smart investment decisions to save tax. Here are a few tips on where to start:
1. Create a Budget
The most important thing to do in order to save is to create a budget. Always go by the rule of save first, spend later. If you choose to spend first and save what’s left over, more often than not, you will end up spending everything. It’s advisable to plan your finances by creating a simple budget. This will show you where you have to spend and where you can sacrifice.
2. Set Goals
You can have daily, weekly, monthly, quarterly, and yearly goals. For example, you can target saving even as low as Rs.500 or Rs.1,000 per month. If you open a Recurring Deposit (RD) now, by the end of the year, you can use the maturity amount to invest in a Fixed Deposit. Goals help you stay motivated on your savings journey.
3. Open a Savings Account
A savings account is crucial to being able to save money. Keeping idle money in a savings account will earn interest. What’s more, AU Bank even provides monthly payouts!
4. Recurring Deposit
If you are someone who can save in small amounts, then an RD is ideal for you. RDs are usually best for those who earn a regular salary. Every month you either need to deposit a fixed amount or it will be automatically debited from your savings account. The money accumulates every month and earns interest. Upon maturity, you will receive a lump sum.
5. Fixed Deposit
If you have a lump sum amount of money lying idle, you can put it in an FD and earn interest on it. You can choose to invest it for as little as 7 days and up to 10 years. The lowest amount banks usually accept is Rs.1,000; while there is no set limit on the maximum investment.
6. Clear Debt
If you have any kind of debt, loan or credit card payment, it’s wise to pay it off first before you start saving. A credit card carries an interest rate of around 3.5% per month, which amounts to 42% per year. A savings account gives you approximately 4% to 6% per year. Your first priority should be to save money on interest. But at the same time, you can put aside some amount of savings towards an emergency fund and investments.
7. Know Tax Exemption Laws
Knowing the different sections of the tax laws under which you can save money will help you a great deal in saving on taxes as well. Under Section 80CCC, you can claim tax exemption against the premium you pay for life insurance. Under Section 80C, you can claim up to Rs.1.5 lakh for tax-saver FD, NSC, PPF, EPF, and ULIPs. Learning these laws will help you decide which investment option is best for you, so that you can maximize your savings.
There are many options to save. There are many investments to make. It’s never too early to start saving, nor is it ever too late. Saving doesn’t take time nowadays with all options available online. You can automate your savings by setting standing instructions with the bank. This way, money will be automatically deducted from your bank account and deposited in an RD or any other investment option.
Start saving now to optimize your returns and grow your wealth!
Click here to know more about 3 financial resolutions of 2020
Read more about the types of savings accounts. Also learn the difference between current and savings accounts