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5 tips on how to make your money grow

Good House Keeping logo Good House Keeping 16-06-2015 Syndigate.info

Tips on how to make your money grow© Dhiraj Singh/Bloomberg Tips on how to make your money grow

What shape are your finances in? Are you getting the most out of your money?

Namitha Rao (32) used to be a high-earning IT professional. Now, she is a dedicated mother to Purav (4 plus) and Mythri (1) and delights in dishing up treats for them. And, this Bengaluru-based homemaker has turned entrepreneur recently - she has launched her own line of jewellery and décor items.

In her spare time, Rao takes Kannada and Hindi tuitions too. A lot on her plate, yes - but she is determined to supplement the family income. 'Girish (her husband) was the sole earner for four years. I wanted to ease the pressure on him, without compromising on quality time with my children. So I've focused on my strengths and skills and I earn enough to cover our daily living expenses, the apartment maintenance and my house help's pay. So, we are left with that extra money from his salary which we can invest,' smiles Rao.

The couple has invested the " extra" in options such as "paper gold" or gold certificates issued by banks, futures accounts and stock exchanges in lieu of buying actual, physical gold. 'We are doing this for our children,' explains Rao.

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1. Start Small, Start Today

1. Start Small, Start Today© AP Photo 1. Start Small, Start Today

Begin by saving that little bit more, every month. Then use that amount wisely. Says Sucheta Dalal, co-founder of Mumbai-based MoneyLife Foundation, 'The first step to make your money grow is to save as much as possible and invest regularly - do not keep your money idle.'

Financial planner Priya Sunder and her husband run PeakAlpha investments, a Bengaluru-based wealth management company. Priya believes that women need to be more aware.

'Women, on an average, live longer than men, which means that at some point a woman is more likely to be left single. Also, studies reveal that a woman lands up with higher health care costs through her life. When it comes to income, an average woman's income flow is lower and erratic. She takes career breaks for childbirth and other family-related issues. And when she rejoins the workforce, there is usually a steep pay cut.

Considering all this, investing a part of the surplus money every month must become second nature for women,' she stresses.

The learning: Start early and invest systematically. The more time your money spends growing, the harder it will work for you.

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2. How To Go About It

How to go about it© Getty Images How to go about it

Confused about where to start? 'Well, an easy way is to opt for insurance,' shares Kolkata-based doctor couple, Sunita (39) and Mainak Malhotra (42).

They have invested in life-insurance for themselves and health insurance for their ageing parents. 'We are doing this so that by the time our son Aditya (who is 10 right now) turns 20, we will have a lump sum in hand for his higher education,' explains Sunita. A section of investment experts however, feel that life-insurance is archaic and no longer a good option.

For example, Priya Sunder of PeakAlpha investments feels that health and life-insurance are 'absolutely necessary, but only for the purposes of insurance itself, to protect your future medical costs and future income stream 10 or 20 years down the line.'

Apart from insurance, investing in stocks and shares is another high-return option. For those concerned about the risk factor here, Sucheta Dalal has a tip: 'One simple rule is to buy shares in 30-40 large companies that have no or minimal debt, such as consumer products companies (Hindustan Unilever or Nestle) or drug companies (Dr Reddy or Sun Pharma) and hold them for a long term.

The most important point is to only invest the money that you will not need for at least five years and once committed, not to be scared by the ups and downs of the market.'

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3. Get Expert Advice

Get Expert Advice© India Picture/Corbis Get Expert Advice

Investing money is one thing, but you must learn to enjoy it as well. Observes Sunder: 'You may save aggressively during your working years and accumulate a large corpus for your retired years, but by then, health conditions may prevent you from enjoying your wealth. On the other hand, spending irresponsibly too is an obvious no-no.

A qualified and reliable financial planner can direct you towards creating the right balance between saving and spending,' she explains. Vijaya Adyanthaya (58) is an example of someone who has achieved the right balance. This Pune-based businesswoman runs two successful companies - Pest-O-Crush (a pest control company) and Springtime Maintenance Services (provides housekeeping services). Her companies together employ over 500 people and their combined turnover is in crores annually. But her path to success has not been without pain.

At 39, she lost her husband, and had to raise their daughter, alone. With degrees in social work and microbiology, she never went to business school but learnt on the job - through day-to-day management, monitoring daily expenses, educating herself on taxation and company laws, and most important, by hiring good househelp to run her home well.

For those who are confused about the spending-saving ratio, here's help: When it comes to savings, Indians as a whole tend to save about 30 percent of their income, observes Priya Sunder of PeakAlpha investments. 'In terms of investing those savings, let age be your guiding principle. At age 30, keep 30 percent of savings in products such as fixed deposits, corporate bonds, et al.

As you age, invest more in FDs. However, consider the returns and the tax advantages before investing'.

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4. Be money smart

4. Be money smart© Bloomberg 4. Be money smart

Whether you are single, married, retired or divorced/widowed, there is scope to plan your finances better. Here's how

Single Women: Single women should save a minimum of 20 percent of their income. Invest in growth assets such as equities and equity mutual funds. Also create a contingency fund for an emergency. Opt for medical cover as well. Avoid credit card debt.

Married Women: Maintain a separate bank account and participate in all financial decisions. Educate yourself about products and investments while financial investments are being made. Also be aware of locker keys, statements, passwords and online access points.

Divorced Women/Widowed women: Divorced women and widowed women should update their bank accounts and insurance policies in their name. They should make nominations and wills in favour of loved ones and pay off loans as soon as possible. They must take health and life cover and invest in a retirement plan.

Contingency planning: Emergencies such as accidents, death, loss of job, loss in business and medical conditions can strike anyone at anytime. The general rule is that the emergency fund should be equal to your six months' expenses. Maintain high liquidity and ensure that it earns a good rate of interest.

Medical Emergency Planning: Is your insurance cover enough, given the high rate of inflation? If you feel it's not, you can buy a separate policy or increase the cover by opting for a top-up insurance plan. If you have Rs 5 lakh cover and want to increase it to Rs 10 lakh, you can either buy a separate health policy, which will cost around Rs 6,000 a year, or opt for a top-up plan, which will cost just Rs 2,000 a year.

*Source: A 2014 talk by financial planner Nisreen Mamaji at a Moneylife Foundation seminar in Mumbai

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5. Small Steps, Big Savings

5. Small Steps, Big Savings© Dhiraj Singh/Bloomberg 5. Small Steps, Big Savings

- Why not buy groceries, monthly household items and veggies, online? Sites such as bigbasket.com, lets you chart your monthly expenses so you can see exactly which commodities are causing more expenditure.

- Switch to LED lights in certain rooms/sections of the house to save on power consumption, and keep electricity bills low.

 - Use credit cards only for emergencies and certain online transactions. Be wary of landing in credit card debt.

 - When it comes to entertainment, customise and choose only the television channels you want - do not let the service provider put in additional channels, all at extra cost.

 - Review your internet usage and choose a plan that best suits you. If you're a homemaker starting a home-based venture, you need all the support you can get - pay your domestic helps a little extra to ensure their loyalty and service.

 - Certain travel websites offer better deals if you book through them. Scour all the sites to get the best possible rates/packages before a trip. Also plan in advance to get cheaper airfare

Reproduced From Good Housekeeping. Copyright 2015. LMIL. All rights reserved.

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