We all keep talking about savings and investment, as if that is all there is to with managing money. There are a whole lot of other nifty ways to manage money properly and benefit through it. Here we go:
Liquidity Management – There are a lot of us who keep our money in the bank as we don’t want to be caught short. Hence we keep money idling there, earning 3 - 3.5% pa. Interest income earned is fully taxable. It would be good idea to keep upto three months expenses, in the bank account. If there is a need felt for more liquidity, the rest should be invested in a liquid plus fund, which can be liquidated in a matter of 24 hours. Liquid plus funds can typically give you 6.5% returns or more. Also, the tax treatment for Liquid plus funds is more benign – 14.16% is the dividend distribution tax to be paid and not the normal tax, again giving an extra kicker.
Providing money for Future requirements – In many cases, money may be required in future after 3-6 months or more for payment of insurance premium, buying some white good for the home, travel expenses etc. In case the time period is known, an appropriate FMP can be chosen which allows you to invest for that time period ( say 3 months ) and then bring it into either the bank account for use or sweep it into a liquid plus fund, till the time the money is required. FMPs are advised in those cases where investment can be made for a specific time period as it gives better returns as compared to Liquid plus funds. The tax treatment is also similar to liquid plus funds. Most of the FMPs available today give a return of over 9% after tax and in some cases even 10% post tax today. This ensures that your money does not idle at any point and at the same time is available to you at the right time.
Investments need not wait - Many want to accumulate the money before investing. There is a feeling that investing small sums is somehow not that very worthwhile. In the process the money to be invested is accumulated in the savings account and is idling away all the time. It is a better idea to invest on a monthly basis either through SIPs or RDs. The good thing here is that the monthly investment is on auto pilot and investment goes on automatically. Hence, money does not unnecessarily lie idle in one’s account.
Operating bank account – Many have multiple bank accounts and money keeps lying splintered in many accounts. Again this ensures that a lot of money lies idle due to the requirement to maintain certain minimum balance, in each account. There is no sense in having too many accounts if there is no real reason to keep them. It is better to route both investments & expenses through one or two accounts only – better still investments can be made from one account and expenses can all be routed through another, ensuring better control.
These small measures should go a long way in managing the available money work harder for you.
Liquidity Management – There are a lot of us who keep our money in the bank as we don’t want to be caught short. Hence we keep money idling there, earning 3 - 3.5% pa. Interest income earned is fully taxable. It would be good idea to keep upto three months expenses, in the bank account. If there is a need felt for more liquidity, the rest should be invested in a liquid plus fund, which can be liquidated in a matter of 24 hours. Liquid plus funds can typically give you 6.5% returns or more. Also, the tax treatment for Liquid plus funds is more benign – 14.16% is the dividend distribution tax to be paid and not the normal tax, again giving an extra kicker.
Providing money for Future requirements – In many cases, money may be required in future after 3-6 months or more for payment of insurance premium, buying some white good for the home, travel expenses etc. In case the time period is known, an appropriate FMP can be chosen which allows you to invest for that time period ( say 3 months ) and then bring it into either the bank account for use or sweep it into a liquid plus fund, till the time the money is required. FMPs are advised in those cases where investment can be made for a specific time period as it gives better returns as compared to Liquid plus funds. The tax treatment is also similar to liquid plus funds. Most of the FMPs available today give a return of over 9% after tax and in some cases even 10% post tax today. This ensures that your money does not idle at any point and at the same time is available to you at the right time.
Investments need not wait - Many want to accumulate the money before investing. There is a feeling that investing small sums is somehow not that very worthwhile. In the process the money to be invested is accumulated in the savings account and is idling away all the time. It is a better idea to invest on a monthly basis either through SIPs or RDs. The good thing here is that the monthly investment is on auto pilot and investment goes on automatically. Hence, money does not unnecessarily lie idle in one’s account.
Operating bank account – Many have multiple bank accounts and money keeps lying splintered in many accounts. Again this ensures that a lot of money lies idle due to the requirement to maintain certain minimum balance, in each account. There is no sense in having too many accounts if there is no real reason to keep them. It is better to route both investments & expenses through one or two accounts only – better still investments can be made from one account and expenses can all be routed through another, ensuring better control.
These small measures should go a long way in managing the available money work harder for you.
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