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How to be rich: A salaried individual’s guide

  • Highlights

  • Set goals by determining where and how much to invest

  • Use tax deductions to add to your wealth

  • Start investing early to reap long-term benefits

  • Repay your debts early to free up your income

From investing early in life to drawing up a financial plan, there is a lot that you can do to multiply your money. Take a look at the five measures that you can implement as a salaried individual to grow your wealth.

1. Determine and set financial goals

The first step is to identify and set goals for yourself. Once you determine your needs, quantify them and set financial goals accordingly. For instance, if you want to purchase a house at the age of 30, estimate the amount required considering the current rate. Say it would come to around Rs.1 crore. With this goal in mind, identify the steps that you will need to take to achieve your goal. Similarly, if you want to buy a sports car, or a home for your parents, calculate the amount that you will need and set your goals accordingly.

2. Save on taxes

o ensure that you are able to meet your financial goals, you must not only increase your income, but also curb your expenses. One avenue that you can consider is to save on the amount that you have to pay as tax. There are several sections under the Income Tax Act that you can make use of to do so. For instance, you can use Section 80C to claim tax deduction on investments such as EPF, PPF and insurance premium up to Rs.1,50,000. You can also claim deductions under Section 24B and Section 80EE if you take a home loan and you are a first-time homebuyer, respectively.

3. Start investing early

It is very important to have financial discipline to increase your wealth. The earlier you start investing and the more regularly you invest, the higher is the amount that you will be able to earn. Also, another benefit of investing early is that any losses that you might incur will not have a significant impact on your total gains in the long run.

4. Plan for emergencies

Planning for emergencies is a big part of ensuring financial stability and growth. If you’re adequately prepared, such a situation won’t hurt your wealth or affect your momentum. You can prepare for such situations in two main ways. Firstly, build a cash reserve that will allow you to tackle any unexpected expense in a timely manner. Apart from this liquid reserve, invest in insurance for yourself, your home, and other assets, such as your car. This will limit your out-of-pocket expenses in case of any damage and will allow you to take care of an emergency situation with ease.

5. Repay debts to free up your income

While you can build your credit score by borrowing and successfully repaying credit, you must be cautious about how much credit you take on. Always borrow only as much as you can repay. Don’t take on too many loans at once or for reasons that don’t warrant borrowing a loan. This can land you in a debt trap and severely drain your finances. Instead, opt for low-interest loans as and when you need to, and make frequent part pre-payments to clear your debt quicker and reduce the total interest payment. This way, you will be able to save and invest a greater portion of your income.

Be sure to follow these 5 simple tips to build wealth, and provide yourself and your family with a financially sound future.

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