India has 17.5% of the world’s population but nearly 76% of its adult population does not understand even the basic financial concepts. Why financial concepts are important to know? Understanding financial concepts is important in building wealth and manage the money. Financial literacy and financial stability are two key aspects of an efficient economy. Financial literacy enhances individuals’ ability to ensure economic security for their families. In India, on one hand, there is a need to reach out to lower income groups and economically weaker sections, and on the other, to millennials who are hyper-connected and require tailor-made financial products but have limited awareness of the possible financial solutions.
Understanding financial concepts is important in building wealth
Knowing the difference between debt,insurance, saving and investment would help on financial planning. Keeping all the money in saving or fixed deposit would not even give better return in inflation. Buying more than 5 insurance plans and pay more than 30% your monthly income as premium would never make you rich. Investment planning is as simple as that planning a project execution. Know your income flow, your financial goal to achieve and time horizon of the goal.
Buying more than 5 insurance plans and pay more than 30% your monthly income as premium would never make you rich.
Increase your knowledge about investing, real estate planning, how credit cards work, credit scores, saving for the future, insurance, retirement, and taxes. Understand the difference between saving vs investment and investment vs insurance.
Read Newspapers and Magazines
Start reading business magazine such as The Economic Times, Mint. Start read about market on each industry and different investment suggested by experts to create wealth.
Build Emergency Fund :
At Least 3 -6 months of your monthly income should be kept as emergency fund. Emergency fund to support in turbulent times or emergency needs.
Invest 10% of your income in retirement:
Start retirement planning as early as possible. Invest in long term mutual funds for retirement. Invest 5 – 10% of your income for retirement. Only 3% people are planning for retirement in india. Retirement planning is part of financial planning.
Stocks, Mutual funds, Gold and real estate are considered as investment. Invest 20% – 50% of your monthly income to build wealth. Write your financial goals and plan your investment based on the goal. If you do not have stock market knowledge, start invest in market by mutual funds. Mutual funds is best way to build wealth by investing in equity market.
Start your investment by investing monthly 100 rupees in mutual funds. Investment is cheaper than movie ticket
Get help from financial advisor. Financial advisor charges between 5000 to 10000 in India. Financial advisor would help to build goals and investment for the goal. Ask below question to check your financial knowledge.
The difference between credit cards and debit cards?
How to pay income taxes and what is income tax slabs?
What is the difference between insurance vs investment?
What is mutual funds and mutual fund types?
What is SIP in mutual funds?
What is inflation and how it hits you?
This is first step in your financial learning. Start now and increase your financial concepts to build wealth. Happy Investing:)