Financial security is a crucial goal requiring careful planning and disciplined saving. Determining how much to save each month depends on various factors such as income, lifestyle, and future goals.
Below are some strategies and tools to help you figure out the right amount.
1. Start with the 50/30/20 Rule
The 50/30/20 rule is a simple budgeting guideline that suggests you:
- Allocate 50% of your income to essential expenses such as rent, groceries, and utilities.
- Allocate 30% to discretionary expenses such as dining out, entertainment, and hobbies.
- Save at least 20% of your income. This should be directed towards savings and investments. Use a compound interest calculator to get a better understanding of how your investments can grow over time.
2. Consider Your Future Goals
Your savings should align with your future financial goals, such as buying a home, funding your child’s education, or planning for retirement. These can be categorised into long-term and short-term goals. There are a range of plans, such as ULIP plans and SIPs, to help you with these goals. To make planning easier, understand your choices and use an applicable calculator to get more realistic estimates. For example, an SIP calculator can help your project your investment returns in across various durations.
Retirement Planning:
Start early with the right investment and pension plans. For example, a ULIP offers the dual benefit of investment and insurance. Use a ULIP returns calculator to estimate the returns over time.
Emergency Fund:
Aim to save about 6-12 months of living expenses to cover unexpected events.
3. Take Advantage of ULIP Tax Benefits**
A ULIP not only helps you grow your wealth but also provides tax benefits under Section 80C and Section 10(10D) of the Income Tax Act. This makes it an efficient way to save for the future while reducing your taxable income.
4. Review and Adjust as Needed
Your savings should be flexible and adapt to changes in income, expenses, and life circumstances. Regularly review your financial plan and adjust your savings accordingly. If you can safely increase your savings percentage in your budget as your income increases, it may be helpful in the longer run. Beware of lifestyle changes over time to ensure that your expenses do not eat into your savings percentage.
Saving at least 20% of your income each month is a good starting point for financial security. Furthermore, putting these savings into investment plans instead of letting them sit idle can help wealth creation through the power of compounding.
** Tax exemptions are as per applicable tax laws from time to time.
Disclaimers:
Unit Linked Insurance Products are different from the traditional insurance products and are subject to risk factors. The Premium paid in unit-linked life insurance policies are subject to investment risks associated with capital markets and NAVs of the units may go up or down, based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. IndiaFirst Life Insurance Company Limited is only name of the Insurance Company and _________________ (UIN__________) is only the name of the Unit Linked Life Insurance contract and does not in any way indicate the quality of the contract, its future prospects, or returns. Please know the associated risks and the applicable charges from your Insurance Agent or the Intermediary or policy document issued by the Insurance Company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale.
IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North [C] Wing, Tower 4, Nesco IT Park, Nesco Center, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 1800 209 8700. Email Id:customer.first@indiafirstlife.com, Website :www.indiafirstlife.com, Fax No. +91226570600. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd. under license. Adv. Ref. No.:_________.
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