Whatever your salary or earnings are, financial planning is a must. A salary of 1 lakh might look like a comfortable income, but without strategic planning, building a solid financial background will be a task. Disciplined planning can help you not only save and invest but also grow your wealth significantly.
Here is your ultimate investment planning for a 1 lakh salary to achieve your financial goals
1. Budgeting – The first step of planning, financial or otherwise, is to make a list. In the case of financial planning, that starts with creating a budget. Categorically listing the expenses will help you understand your expenses and determine if there are places where you can cut corners. Always remember to account for miscellaneous expenses and have a small emergency fund (which we will explain later) for any unforeseen situations. It would be best if you always aimed to save at least 30% of your income for better financial planning.
Here are some of the categories you should list (Please note this will vary from individual to individual, but here are the broad ones)
- Rent
- Utilities (should include your electricity and internet)
- Househelp (if any)
- Transportation
- Groceries
- Transportation
- Insurances
- Miscellaneous
Once you keep these aside, make sure your Savings and Investments come up to 30% of your salary (₹30,000 in case of a 1 lakh salary) or as close to it as possible.
2. Emergency Fund – Understanding the importance of an emergency fund when the sun is shining bright might be very difficult, but we always have to plan for those unforeseen showers. This fund is your safety net; it will keep you going even in the worst financial phases. For example, when Covid hit, many individuals lost their jobs, so an emergency fund helped through that time. Ideally, an emergency fund should be enough to sustain you for a minimum of 6 tough months. In a 1 lakh salary, keep 10k as your emergency fund every month.
3. Managing your Debt – Debt can pull you back quite a bit in your financial planning goal; hence, managing your debt smartly is crucial. Debts usually mean high interest, so you should always prioritize paying it off. Try the debt avalanche method, which is when you first pay off debts that have the highest interest rates while just paying the minimum payments on the rest. This helps reduce the amount of interest you are paying while accelerating the debt repayment process.
4. Investments – Once you have taken care of your basics and emergency fund, it’s time for investment planning. You might save a lot of money without investing, but your money will never grow. You can start small by taking safer bets towards your retirement and investing in the Employees’ Provident Fund (EPF) or Public Provident Fund (PPF). These are not only great investments but also provide tax benefits and compound interest.
Once that is taken care of, allocate some funds to –
- Mutual Funds – Here, you can go for some Systematic Investment Plans (SIPs), which are fixed deductions and help manage market volatility.
- Real Estate – Investing in property can offer great appreciation and rental income.
- Fixed Deposits – These are safer bets as risks are low, but returns are also low. This can be a part of your diversified portfolio.
- Stocks: These are higher risks, so even the benefits are high. It requires a lot of knowledge, as well as following the market, trends, and risk tolerance.
Make sure your investments are at least 20k a month in a 1 lakh salary band.
5. Tax Planning – Know all your deductions where you can reduce your taxable income. Check out sections 80C, 80D, investments in EPF, PPF, ELSS, and life insurance premiums under the same.
The Way Forward
Your salary will increase, and so will your capacity to invest. Make sure you can level off your expenses and maintain a steady investment figure for maximum benefits and returns. At least once a year, ensure you sit with your budget and all the above factors to guarantee you are on track. You can easily set yourself on a path of financial security and independence, but it can only happen through patience, persistence, and strategic planning.
