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Tips to invest wisely by stopping wastage of money

Middle-class persons struggle to find answers to two questions, “How to invest wisely” and “How to stop wastage of money”. We will discuss both one after the other.

How to avoid unnecessary expenditure  

Persons can invest in one or the other instruments only after saving from their monthly income.

Groceries: It takes away a significant chunk of the monthly income. So, it is important to reduce expenditure over it. It can be done by shopping non-perishable items once for the entire month or even for six months.

Before purchasing items, compare cost both in offline (Supermarkets, Hypermarkets) and online (Grofers, BigBasket, JioMart, PayTM Mall and Amazon Pantry).

Medicines: If there are elder persons in the family, then expenditure on medicine is quite high. In order to minimize it, online options can be explored as it not only provide discounts but also cash backs.

Note: Check expiry of the medicines before accepting it.  

Rent: If you reside in rented flat, you have two options

  1. Search for a flat near your office to reduce fuel cost
  2. Find a flat in the area where the rent is less.

Select one of the two options after calculating the cost associated with it.

Bills: Clear bills and other fixed liabilities such as school fees, tuition fees etc. on time to avoid penalties.  

The above are some of the tips to reduce monthly expenditure.

Safety fund

It is best practice to set aside 10 percent of the income and deposit in saving bank account. Repeat this practice until the fund grows to the amount at least equal to six times the monthly income.

This fund can be used in case of any uncertainty such as any pandemic or accident etc.

How to invest wisely

Invest

Try to invest 10 to 15 percent of the monthly income wisely for long term period ranging from 10 to 15 years.

There are different instruments to invest. Following are few of them.

  1. Fixed deposit: Although the risk associated with a fixed deposit is almost NIL, it provides low returns.
  2. Debt Mutual Fund: As it invests in bonds and debt securities, it provides slightly higher returns when compared to fixed deposits. The risk associated with this type of fund is greater than Fixed Deposit but less than the stock market.
  3. Gold: Gold is also one of the best options for investment. Investing in the yellow metal can be done in two way
    1. Physical gold: Buying physical gold in the form of jewelry is not a good option as it involves making and other charges.
    2. Paper gold: Gold Exchange Traded Funds is the best option as it does not involves any making and other charges. There is also transparency in the cost of the metal.
  4. Stocks: As the risk associated with an investment in the stock market is very high, it has the potential to provide high returns. However, only persons with experience and knowledge about the market can consider entering into it. Alternatively, a person who wants to have exposure to the stock market but looking for lesser risk can consider ‘Equity Mutual Fund’. Note: Risk is associated with ‘Equity Mutual Fund’ too.
  5. Investing in options that gives benefits in tax can also be considered. Some of the options which benefit during tax filings are
    • Equity Linked Saving Scheme
    • Sukanya Samriddhi Yojana etc.

The amount left after completing all the above responsibilities can be used for other activities.