Five important tips to help your create wealth plans in your early life

When you start earning, the first thing you do is indulge. You buy all that you can get, spend on all the luxuries you can afford and generally live the life you want. Wealth plans are hardly ever on the agenda when you start earning and even later. People generally think about wealth plans and investments in later stages of their lives when they need to save for things like a home, their children and health care.

When it comes to wealth plans though, starting early is the key to have a good plan. When you invest in a wealth plan early you can rest assured that you will have acquired a decent lump sum for yourself when you’re settled and need to make more investments.

But wealth plans and deciding how to buy them can be tricky and is a financial commitment that you should not get into without know it thoroughly. So here’s a guide to help you create wealth plans of your, own along with some tips on saving and investment.

1.      The first step to creating wealth plans is saving. If you spend all your disposable income in your early years you will have nothing left to invest. Budgeting and saving money is the best way start on wealth plans. Once you’re able to save up a good chunk of your monthly income you can begin investing it.

2.      Invest in ULIPs. A ULIP plan or a unit linked insurance policy is insurance as well and investment plan. When you invest in ULIPs, a part of your premium goes towards life insurance while the other part in invested, either in equity or in debt, depending on your final goal for investment. ULIPs are a great way to invest your money for future wealth.

3.      Frame your financial goals in a way that you know how much you need to save. Be it for buying property, for the education of your children, to pay the healthcare expenses of your parents or investing in a business or even for retirement, you need to know what your ultimate goal is, in order to create accurate and effective wealth plans.

4.      Research and study every financial tool that is available to you. You should always invest in schemes and plans that you are thoroughly familiar with. Plans like ULIPs, mutual funds, PPFs etc are a great way to invest your money, but only if you know what you’re getting into.

5.  Learn about tax savings early on. Financial tools like life insurance can help you save on income tax. You should know about these tools early on, so you can save tax and in turn save more money.

How you can create wealth by investing in tax saving plans

People invest in endowment plans because they are a good investment opportunity; they want to save money for their future plans, their children, their education etc. But one of the biggest benefits of an endowment plan is that they are a great way to save tax. Under Section 80C of the Income Tax Act, the government does not levy a tax on the money you invest or that goes into your insurance plans or endowment plans.

Tax saving measures can help you save an enormous amount of money. As important it is to invest in funds, it is also imperative to save money. And, claiming tax deductions is one of the ways for doing the latter. Because, the money you save from tax deductions could be further invested into equity or other long-term funds to grow your wealth.

ULIPs or unit linked insurance plans are a great way to invest your money while at the same time insuring yourself. Here’s how a ULIP plan works, the premium that the policy holder pays are divided into two parts, one goes to the life insurance and the other goes to mutual funds as an investment. A ULIP holder has the option of either investing in equity or in debt. An aggressive policyholder will choose to invest his money in equity while a conservative policyholder might choose to invest his money in debt. The money is invested during the term of the policy which may range between 5 to 15 years.

Apart from ULIPs the government has devised a number of plans and schemes to help people save on their income tax. These tax savings plans will help you save money and in turn create wealth. Some of these savings plans are, the public provident fund (PPF), the Rajiv Gandhi Equity Saving scheme, the voluntary provident fund, national saving certificates and the Sukanya Samridhi account.