Earning an income is an immense source of joy as it indicates your capabilities and allows you to add quantifiable value to your hard work. While each salary is important, there is something to be said for salaries that cross a certain threshold and allow you to enter a coveted income bracket of INR1 Lakh. Here is a five-point summary on how to invest first 1 Lakh.
In India, despite the hard work that tons of people do, INR 1 Lakh is a big sum of money that only a small number of individuals are privileged enough to be able to earn. Once you earn this figure, however, the next course of action is to be able to invest it such that you truly stand to acquire a return on the same in the future.
As a general rule of thumb, it is best to begin investing once you have a sizeable emergency fund that is capable of tiding you over for 6 months. Listed below are a few suggestions on how best to invest the first INR 1 Lakh you earn.
#1. Invest First 1 Lakh: Clear any outstanding debt if you have any
For starters, the best investment you can make is clearly any debt should you have any, as early on as you can. Different forms of debt individuals may find themselves experiencing range from home and car loans to education loans and credit card debt. Having existing debt leads to complications in investing. It is important to remember that while investments don’t guarantee returns you are guaranteed to pay an interest on your investments. If an investment proves to be faulty and incurs losses, you will still be expected to pay interest on it in addition to any debt you might have. Therefore, it is important to first invest in clearing your debt prior to investing in the stock markets.
Read Also: 7 common IPO mistakes and how to avoid them
#2. Invest First 1 Lakh: Invest in a good health insurance plan
Vital to any financial plan is the ability to protect yourself and your loved ones. Life is unpredictable and you should always have access to a good health insurance plan. This way you aren’t caught unawares and can always avail of the healthcare you need without stressing over the funds you might need to foot the bill. By investing in a health insurance plan while you are still young and healthy is most advantageous. This is because you get the benefit of having to pay comparatively lower premiums in comparison to those older than you.
#3. Invest First 1 Lakh via a systematic investment plan (or SIP)
Here, you can create a diversified portfolio for yourself with the aid of mutual funds, bonds, stocks and debentures. Mutual funds in fact are known to be relatively safe investments that allow you to accrue returns over time.
#4. Invest First 1 Lakh in tax-saving products
An equity linked savings scheme (or ELSS) makes for a viable investment that serves as a tax saving product. With it, it is possible to achieve long-term financial goals that you might have. This is because the scheme allows you to accrue good returns while allowing you the additional benefit of saving on your taxes.
#5. Invest in yourself
Although an INR 1 lakh salary can seem to be a lot, with household expenses and other recurrent bills that you might find yourself lumped with it, it is possible to have only a sliver to carve out from this sum to do whatever you would like. Therefore, investing in an interest, hobby or passion with this money may also be a viable option.
The output derived from investing in yourself is great as you have the potential to monetize whatever new skill you acquire. It is important to inculcate a habit of saving a portion of your salary early on in your career such that you are able to support yourself in the event of an unfortunate event. By investing your savings you are able to grow your money. The Angel One website is a great place to begin your investment journey.