Wednesday, 3 November 2010

Reduce your Loan and Increase investments

What would you do if you get more salary? I mean a salary hike. You may think to purchase a new household item, a car or any luxury items etc. Recently I heard a speech that Indians are living for working.  Sure we are not spending our time idly. Always do something creatively. We are working for our families, to promote our family and promote our children. We value relationships and wish to live for them. Recent survey revealed that there will be a big salary hike in India when compare with other nations. It would be an average hike of 10.6%. Then what can we do with this increased salary. Let us discuss some creative way.

How to manage this increased income?

The recent financial recession taught us how to spend money and how to manage our daily life with the minimum resources. So we know how to handle money wisely. We can divert this salary hike in an effective way. Almost all electronic items are renewing every hour. New technologies are arising and the old one will be out of date with a high speed. Then spending for new electronic items is not wise, unless it is not necessary.

Reduce or Pay off your loan

When you get this salary hike the first and foremost thing you have to do is reduce your loan up to a certain extent. You can pay off your loan if possible, or can increase the EMI and can reduce the number of installments, or can make a part payment of loan. This will reduce your financial burden and also can save some interest on loan. This way you can save your hard earned money by not paying interest which is expected earlier.

Start investing or increase savings

After paying off your loan you can turn to savings. You can invest in any recurring schemes, Stocks, Mutual funds, bonds, fixed deposits etc., according to your financial goal and risk tolerance. If you have no much time to find more investment opportunities and study the market, go for mutual funds. You can invest monthly in mutual funds under Systematic Investment Plan (SIP) just like recurring deposit in Banks. There are so many types of mutual funds. Find a few suitable mutual funds. If you are not able to find a suitable fund scheme, find a reliable broker or investment firm. They may guide you effectively. Now there are so many of them. According to our tax rules earnings from mutual funds are tax free with some terms and conditions. In mutual funds you can expect an average growth of 15%. But remember that mutual funds have market risks. You may get more or less according to the scheme and market condition.

Secure the future of your family and kids

When you are an earning member you can look forward to give protection of your family and kids. No doubt you should join some life insurance schemes which help you to protect your family, if there is any misshapen occurred. Join any endowment policies or term insurance where there is a low premium and high sum assured. You can also go for suitable unit linked insurance plan or plan for children.

PPF and other secured investments

Public Provident Fund and other secured investments are also good for investing. It may give only low earnings, but it is a safe and secured investment. Try to balance your investments with high risk and low risk which may protect you from market fluctuations.

Even if the survey reveals that there may be a high salary increase in India, this may not affect the majority of people in India. In any case reduce loan and try to increase savings for a better future and also for the financial well being or our selves and our nation. But loan for purchasing a real estate or residential house is always appreciated because when we collect enough money to buy a property the property value will be increased two times or three times. So buy such property as early as possible by taking loan and pay off the loan with interest. The loan amount and interest will be not being more than the market value of property at the time of paying off the loan. So wish you and your family a good financial stability.

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