In your 30s? Here are five money moves you should make in April
If you start with these five investments, they can give you a head-start in your money life.
If you have just breathed easy after running around for one week to make those investments to save on income tax, here is an opportunity to avoid a repeat of the last week’s headaches next year. Most individuals prefer to forget about money and taxation when the new financial year starts in April. Hence there are shorter or no queues, nor is there pressure to decide quickly. Put simply, NOW is that time of the year where distributors and advisors are willing to listen to you and make the extra effort to fulfill your demands. Do not let the income tax and money management take the back seat once you enter April.
Here are five money moves that you should make now.
Open a PPF account: Public provident fund (PPF) may appear to be the least glamorous thing to do when the stock indices are touching new high. However experts take a different view. “Given the government guarantee backing PPF, it is a good vehicle to start investing. Invest in the first five days of April to maximize the interest on your investment,” says Amar Pandit, CEO of Mumbai based My Financial Advisor. If you invest at the beginning of the year you enjoy the interest for the entire year whereas if you invest towards the end of the year you miss on the interest earning opportunity. For the quarter April-June 2017, you are offered tax free interest at the rate of 7.9% per year in addition to the tax break it fetches for the investment up to Rs 1.5 lakh per year under section 80C of the Income Tax Act.Plan your retirement with NPS: National Pension System (NPS) makes a strong case given the low charges and the exposure it offers to stocks, bonds and government securities. It helps you to build your retirement corpus over your working life. You can buy an annuity from an insurance company after you retire from the proceeds of NPS account. “If you are below 35 years, go for ‘auto’option in NPS which enables you to invest as high 75% in stocks. Over a period of time the exposure to stocks is reduced and ends up creating large corpus for the investor by the time you retire,” says Nikhil Kothari, chief financial planner, Etica Wealth Advisors.
The enhanced tax benefits make it further attractive. One can enjoy tax benefit for an investment up to Rs 50,000 per year. Lack of liquidity was a serious issue for NPS. However over last two years the government has allowed tax exempt withdrawal of money up to 40% of NPS account balance at the age of 60. Budget 2017 also proposes for a tax exempt withdrawal of 25% of the money before retirement.
Sip your ELSS: Investments in tax saving funds, technically termed as equity linked saving schemes (ELSS) are catching the investors’ interest. Till February 2017, tax saving mutual funds have seen net inflows of Rs 7,191 crore in FY 16-17 as compared to Rs 4,577 crore in the same period previous year. Though buoyant stock markets make one consider ELSS as a tax planning tool, one should not ignore volatility in the stock market. “The best way to invest in tax saving fund is through systematic investment plan. If you start in April, you get enough time to invest in ELSS through SIP and benefit from rupee cost averaging,” explains Pankaj Mathpal, certified financial planner and Managing Director, Optima Money Managers.
Sukanya Samriddhi Yojana: Aimed at creation of corpus for well-being of a girl child, Sukanya Samriddhi Yojana (SSY) makes a smart investment option for you. You can open an account in your daughter’s name and invest money every year. You get 8.4% tax free rate of interest on your investments in SSY as of now. Contributions to SSY are also eligible for tax deductions under section 80C of Income Tax Act.
Buy the right cover: Insurance bought in a hurry generally leads to either inadequate cover or unwanted product. “If you begin planning your insurance purchase in April, you have adequate time on hand to research available options in the market,” points out Pankaj Mathpal. You can quantify your insurance needs and pick the right option that serves the purpose. Buy adequate amount of life, health and personal accident insurance cover.“If you start investing early, you give more time to your money to compound. Define your financial goals as soon as possible and save money as per your asset allocation,” advises Amar Pandit. If you take some serious steps in the right direction now, you stand to get a good head start in your money matters.