The benefits of investing are enormous. Read on to know how investments can help you during various life events.
Investment should be a regular exercise and must be done irrespective of how much you earn. Even if your income is below the taxable limit, you must invest to create a corpus to achieve your financial objectives in the short and long run. Some investments do give you a tax benefit while others help you in fulfilling your career goals.
Therefore, it is wise to invest even if you are below taxable income. Here is how investing helps:
Invest Money To Achieve Financial Goal
Never take the importance of savings for granted. Investment not only helps you face tough financial situations but help in achieving financial goals like children’s education and marriage, buying a home and several other short and long-term objectives. An investment of Rs. 1,000 per month for next 25 years at 18% return could get you a corpus of Rs. 58.23 lakh. If you understand the power of compounding returns, then you’ll probably never say ‘no’ to invest.
Mitigate Inflation Impact
With inflation, the value of money depreciates, which means the money available to you may not be of the same worth after a few years ago. It is therefore important that the money you have should be invested in instruments that help you create a good corpus to beat the inflation. For example, if you have Rs. 1 lakh and you don’t invest it, then the value of money will not be the same as today and after 20 years would be equal to today’s Rs. 37.7K. This is taking into account the average inflation for the next 20 years to be at 5% p.a. In simple words, what Rs. 37.7K could buy you today, the same would cost Rs. 1 lakh after 20 years if inflation stays at 5% p.a.
Invest To Maintain Sufficient Contingency Fund
You never know what type of emergency you may face in the future, so it is important to maintain a fund that could help you deal with your daily expenses. This would take care of your bills and EMIs if your regular source of income stops for some reason. You should maintain a contingency fund equivalent to your 8 to 10 months expenses. If you invest in avenues such as Liquid Funds, Savings Bank Account or bank Fixed Deposit, then your money will grow and create an emergency fund.
See Your Corpus Grow
Your requirements may increase in the long run, and you may need funds for events such as buying a car, expanding business, vacations, etc. Investing your money could work as a parallel income and it would provide you a financial cushion in the future.
Invest For Your Retirement
Retirement is one of the key financial goals for everyone. Your money decisions today will set the track for your life after retirement. Thus, irrespective of the fact whether you are in taxable income or not, you should work towards having a fund that can take care of your retirement. This can be done by investing now in suitable instruments that yield good results.
If you want financial independence throughout your life, then make making investments a habit.