Why is it necessary to get your house in order before jumping on the investment bandwagon!
“You must learn from the mistakes of others. You can’t possibly live long enough to make them all yourself.”- Sam Levenson
Young people are often advised to invest the money as soon as they start earning. However, before venturing into the investment world one must take care of the leaky bucket and set the house in order. Here’s how.
Create an Emergency Fund:
By creating an emergency fund one can remain secured and easily face unforeseen expenses or an unavoidable crisis. Hence, it is the most important and non-negotiable item in one’s personal finance. Make sure to park a sum of your income aside, which can take care of four to six months of your living expenses.
Medical Insurance:
Often neglected, medical insurance or health insurance is a significant aspect of your investment and should be done early on. Health insurance taken at an early stage in life can offer relief during emergencies. Since the policy taken at an early age requires no medical check-ups, provides easy and hassle-free renewals, and has a lesser chance of rejection due to health issues. While taking medical insurance it is also important to avail adequate sum assurance. One should take adequate cover depending on the age and income, which can take care of any medical emergencies.
Life Insurance:
One of the crucial financial decisions that you will ever take is to secure your family’s financial future in your absence. It’s always advisable to take it as early as possible as buying life insurance is cheaper when you are younger. Always refer to a term plan to start with as it’s easier to understand and it provides a higher sum assured at an affordable premium. An insurance policy is also eligible for a tax benefit under section 80C.
Tax Filing:
Once you begin earning, you must start filing income tax returns. It is mandatory for those whose total income during the financial year exceeds the basic exemption limit. But, there is a common misconception that if the income is below the taxable bracket, you don’t need to file ITR (Income Tax Returns). That’s not true. By filing ITR and paying the required taxes every year you are not only helping in building the nation as a responsible citizen but also availing a number of benefits personally such as:
Proof of income- ITR receipts are the only proof of income when you are self-employed.
Tax refund- To claim a tax refund if in case you have paid higher than the expected tax, the only option is to file ITR.
Loan approval- In case of applying for a personal or home loan, you are required to submit at least three years of your ITR with the application.
Capital gains/losses- Filing ITR regularly helps you to carry forward your losses to adjust with gains in subsequent years.
Visa processing- While applying for a visa before any international travel the applicant is asked to submit income proof with at least three years ITR by most of the country’s visa service providers.
If you have more queries on the matter you can reach out to us at info@univestocapital.com
