Financial planning should begin with first job

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The last decade has seen a significant rise in the income levels of people, especially the salaried class. However, factors like inflation, expensive healthcare and children's education have made it challenging for this class to sustain a quality lifestyle and to have enough for the postretirement years. The answer to this is in investment planning, which should begin as early as the first employment. To start with, two things are absolutely necessary - insurance and tax saving investments.

Health Insurance: Since good healthcare is expensive, it is important to get a comprehensive mediclaim cover for the family. The premium is exempt from income tax, subject to certain conditions.

Tax saving investments: The government allows certain investments for tax deductions under section 80C, which include PPF, ELSS, life insurance premium, PF, etc. They offer attractive returns and tax sops, so one should invest maximum permissible amount per year. IT Act also allows tax rebate on interest and repayment of housing and education loan for children. Hence, it would be prudent to avail of housing loans early in one's life.

 Life insurance: In the event of untimely death of the earning member, life insurance ensures comfortable future for the family. One can chose between term or endowment plans depending upon the amount of premium that one desires to pay. Term plans have lower premium.

Investment options for balance savings: The remaining savings could be invested based on individual financial goals - short, medium and long terms. A long term goal could be retirement plan, medium term goals could be marriage, higher education of children and purchase of house, and short term goals could be to create a contingency fund for meeting emergencies. Banks offer overdraft facility along with salary account which can be availed of for meeting short term fund requirement. In such a case, one can dispense with creation of contingency fund.

Liquid funds are a superior tax efficient option to parking surplus funds idling in a savings account. Withdrawal of money from a liquid fund is possible through any ATM.
Investment for medium and long term goals must be made in diversified asset classes depending on risk appetite and liquidity requirement. Investments like bank or post office fixed deposits, Gilt and debt funds give stable and conservative returns. Another low risk investment option is PFRDA's National Pension System (NPS) which is an excellent tool for retirement planning.

For long-term financial goals and to keep up with inflation, a salaried person could invest in equity mutual funds through the SIP route. New investors can avail of the benefits under the Rajiv Gandhi Equity Savings Scheme (RGESS), which offers tax concessions to first time equity investors earning up to Rs 10 lakh annually. Investors with surplus savings after all the above, can also look at investing in real estate which has offered attractive returns in the past, but has high risk and low liquidity.

To sum it up, the golden rule to a healthy financial life for the salaried class is first meeting basic requirements of healthcare and insurance, availing tax concessions, building a well-diversified portfolio of different asset classes depending on individual risk appetite and having the discipline of sticking to a financial plan over its cycle of execution.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax PlanInvest Online
2. HDFC TaxSaverInvest Online
3. DSP BlackRock Tax Saver FundInvest Online
4. Reliance Tax Saver (ELSS) FundInvest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) FundInvest Online
7. SBI Magnum Tax Gain Scheme 1993Invest Online
8. Sundaram Tax SaverInvest Online
9. Edelweiss ELSS Invest Online

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Best Performing Mutual Funds

1. Largecap Funds Invest Online
1. DSP BlackRock Top 100 Fund
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2. Large and Midcap Funds Invest Online

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1. Reliance Equity Opportunities Fund
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1. DSP BlackRock MicroCap Fund
4. Sector Funds Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Tax Saver MutualFundsInvest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund
6. Gold Mutual Funds Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund