Dreams know no bounds. You might want to own a luxury car, buy a house in a posh area, send your kids to the best school or go traveling the world. However, as a salaried individual, there are a few dreams you might have to compromise if you do not follow the right saving and investing strategies. You are dependent on your paycheck and forced to live within the means of your salary. But if you save and invest wisely, you can accumulate significant wealth in the long run apart from your salary.
Here are five ways to create wealth for a salaried individual:
- Start early: The prime step to create wealth for a salaried individual is to start early. Irrespective of how much you earn, saving even a small sum of money can go a long way in accumulating wealth in the long run. The best way to create a habit of saving is by opting for automated savings. Create auto-debits from your accounts as soon as your monthly salary is credited. This way, you pay yourself first and use the remainder of your income for expenses. Saving early allows you to invest smartly and benefit from the power of compounding, where you earn interest on the accumulated interest too.
- Create monthly SIPs: The ideal way to create wealth is to turn your monthly savings into SIPs (Systematic Investment Plans). SIPs allow you to contribute a fixed sum for a specific duration in a mutual fund of your choice. You can begin a mutual fund SIP with a sum as low as Rs. 500. However, by consistently investing in mutual funds through SIPs, you can accumulate a large corpus in the long term because of the power of compounding.
- Increase your investments over time: As you advance in your career and get a better salary, it is critical that your salary and corresponding savings and investments, like mutual fund SIPs, also increase in the same proportion. For instance, if you get an increment of 10% in salary, your mutual fund SIP should also increase by 10%.
- Invest lump sum whenever feasible: Even if you consistently achieve your savings goal, it is beneficial to direct any lump sum influx of money towards your investments, such as mutual funds. For instance, if you get a bonus, you can invest that money in mutual funds instead of splurging the entire sum. Additional money will allow you to either achieve your financial goal before time or receive a higher amount at maturity with better returns.
- Save taxes: Investments that generate high returns while giving you significant tax benefits are ideal choices for wealth creation. As a salaried individual, you have to pay income tax, which consumes a large chunk of your salary. However, you can get tax exemptions and create a hefty corpus by choosing tax-efficient investments, such as ELSS mutual funds. ELSS mutual fund investments are tax-exempt under Section 80C of the Income Tax Act, 1961, subject to some conditions.
Wealth creation requires financial discipline, patience, and dedication. Choosing sound investments like mutual funds allows you to create wealth without hampering your budget, even in the initial job days. Use the Tata Capital Moneyfy app to compare, invest, monitor, and manage your mutual funds from one platform. Moneyfy gives you detailed insights into all mutual funds, enabling you to make a wise investment decision.