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While you work hard to earn money, money needs to work for you as well. That is the only way to beat inflation and get a healthy investment portfolio. But how to make money work for you?

Money is a key element in life. While money doesn't directly buy you happiness, it gives you the liberty and freedom to lead your life on your own terms and that is something that definitely makes you happy! Managing money properly is very important. No matter how much money you make, or how little of it you make, you can manage it efficiently and reach your financial goals with ease. Take a look at this article to know how you can make your money work for you in a simple and logical manner.

Save and Invest

Whether you earn INR 5,000 a month or INR 500,000, you need to get into the habit of saving and investing regularly. You need to save a minimum of 20% of the money you earn. It may be difficult initially, but if you make a financial roadmap, saving money on a regular basis will become a lot easier. Saving is very crucial, but if you just allow your saved money to lie idle in your bank account, you won't be able to meet your financial targets. 

For that, you need to start investing. Understand the various investment platforms that are available to you and choose one that matches your risk profile. Lock in your savings and become money-wise. 

While you invest for your future, also remember to create an emergency corpus. If you have such a fund, your savings will remain protected. In the event of an emergency, you won't have to dip into your savings and exhaust all your hard-earned money in one go!

Take Away: Build an emergency fund of 6 months’ expense backup and then invest at least 20% of your monthly disposable income to create a healthy investment portfolio!

Financial Planning 

As stated, there are different investment platforms available to you. However, every single investment may not be suitable for you and this is why you need to understand the risks involved. You also need to make a budget before you begin to ensure you are investing properly. Here are some important components of financial planning that you must be aware of:

A. Set your goals - Everything starts with a financial goal and work according to it. This will help you not only to save money but also guide you in your investments. You will be aware of the availability of funds before you invest. 

B. Analyse - Analyse the risk associated with each investment. Then check to see whether or not it matches with your risk appetite. Only invest if you are willing to take the risk, else look for another type of investment. 

C. Diversification - Diversification is important. Never invest all your money in a single investment such as a fixed deposit or a mutual fund. Spread them out over various investments according to your ideal Asset Allocation and have a mixed portfolio for best results.

Take Away: You must formulate a financial plan for your investments according to your asset allocation and your risk profile so that your long-term financial goals can be achieved!

Manage and Minimize Debt 

Debt is something that can really hold you back and hamper your financial progress, especially the high-interest ones. As a result, you need to make a serious attempt to become debt-free. It may not be easy, but you should aim to prioritize paying off the high-cost debts such as credit card bills and personal loans. Once you become less burdened with debt, you will be able to focus on your financial roadmap and make better progress.

Also, remember to use your credit card wisely. Look for a card that has an excellent rewards program. Use your card and earn the points and make subsequent purchases or payments with those points.

Take Away: Home Loan has an additional tax benefit and hence can be continued as it is a “good loan”. But other types of debt, especially credit cards and personal loans need to be repaid before investing the additional money!

Inflation beating investments

Investing blindly, without analyzing the platform, won’t fetch you the desired results. Apart from evaluating the risk, you also need to check for inflation-beating investment products. You have to consider the long-term returns when you invest, and so getting a few inflation-beating investment products is a complete must. Your best options here include equities, dividend-paying stocks, gold, and commodity stocks, among others. All these investments beat inflation and you continue to earn high returns over a longer period of time. 

You could also invest systematically through the SIP route. Systematic investment not only helps you to create a discipline in investing pattern but helps you leverage the rupee cost averaging over a period of time as well. With systematic investment, you get to purchase at all price points, and hence your average cost falls; thereby improving your overall return on investment.

Take Away: Your investments need to work for you by beating inflation. That is the only way the real value of your investments can be retained or grown over a period of time! Also, remember to research before you buy high-cost assets to analyze the real need and the return on investment!

Passive Income

One way to create passive income is through real estate. If you buy property now, its value will go up over time. And in the meanwhile, you can generate a rental income as well. Consider this and make your money work for you. 

Take Away: The creation of passive income is healthy for your investment portfolio.

Learn new investment opportunities

There are various new platforms and other investment avenues which could provide inflation-proof returns. So, it is a good idea to update your knowledge and know what’s trending.

Take Away: Now, you can learn about cryptocurrencies and NFT (Non-Fungible Tokens) as it is new and trending.

Insure yourself

While you get busy planning your finances and saving, do not ignore your health. Financial stress is a leading factor that causes several health issues in young people. Relax and enjoy your financial journey and you will be able to stay fit and healthy too. Also, buy a health insurance plan on a priority basis. This is an investment you need to make not just to protect yourself, but also to protect your money. Healthcare is very expensive and just one hospital stay can wipe out all your savings. Prevent this from happening by getting a good health insurance plan at the earliest.

Also, remember to cover yourself adequately as it would be your Plan B. In case, something were to happen to you, your family’s investment corpus should not be disrupted. 

Take Away: Insurance is the only way to protect your wealth from depletion if some unforeseen situation comes your way. So, it’s better to be safe, than sorry.

Make money work for you to create a healthy retirement corpus!
 
If you follow all the points mentioned above and make your money work for you, you will become financially sound and independent. This will allow you to lead a happy and stress-free life and you will always be in charge of your own life and decisions. Ensure this continues till the last day of your life. You won't always remain young and your income will stop at one point. To ensure your financial freedom, start building a retirement corpus today. Invest in a pension fund to keep the money flowing for as long as you live. Then, you won't have to depend on anyone and compromise on your lifestyle in the twilight years of your life.