scorecardresearchHow do you meet your financial goals in the absence of adequate income?

How do you meet your financial goals in the absence of adequate income? Here are 4 ways

Updated: 06 Apr 2022, 10:29 AM IST

Look for more income sources, invest early and stay invested for more than a decade for good returns.

Meeting financial goals with limited income sources.

Meeting financial goals with limited income sources.

With the prices of daily essentials soaring up and income being meagre, many people argue how are left with very little amount to save enough for their financial goals. One reason can be that not many people are aware of their financial goals or how to set a financial goal in the first place.

The second most plausible reason can be the lack of necessary income that refrains many from meeting their financial goals. Deciding on your financial goals starts with realizing the life goals that would require you to spend money on them. These can include children’s higher education, marriage, a down payment for a house in the future, retirement planning, and more.

Assume the following expenses under the life goals that investors like you must save and plan for.

Life GoalsEstimated expenses every month (in Rs)
Children’s higher education25,000
Down payment towards the house purchase1,00,000
Retirement Planning50,000

This means that you must invest enough to earn at least 1.75 lakhs every month. As an investor, you may choose to pursue all your financial goals simultaneously or one by one depending on your priorities. A lot depends on your risk aptitude and your understanding of investments and their corresponding returns.

Racing against time

But what if you do not earn enough to meet these financial goals? This is a problem that nags most people though only a few have been able to master this problem and solve it accordingly.

First, you may try for a high-paying job if you think that your current job does not value you much in terms of compensation. Hang to your current job while searching for a new opportunity that pays you for your skills and experience. You can bargain for better pay only when you look at the expected salary from the point of view you must invest every month.

These are the key investment tips by Warren Buffett. 

Also, you do not have unlimited time nor a wand to suddenly bring in the much-needed money. This means that you have to start working on your spending habits and simultaneously look for alternate ways too to earn money.

In today’s world, having an alternative source of income is called ‘hustling’. You can turn your hobby into your profession, which means that you charge people for the products or services that they need and you love to do. A second option is that you learn a craft and hone your skills with continued practice. You can then apply for certain freelance or remote offers wherein you can charge for the work done.

Invest early

There is one benefit of viewing your investments from the lens of your financial goals. Only then you will know if you have invested rightly and if you have invested enough. But for that, you must start investing early in your life.

The next important thing is to stay invested, which means that we must invest without fail. You can either allocate a part of your earnings to a separate savings account from where you can save from time to time or park your money regularly in myriad investment plans through systematic investment plans (SIPs). In case of a sudden windfall amount, you can invest in a lump sum too.

Choosing the right investment options matters also. For example, you can invest in mutual funds to earn market-linked returns. This you can do through regular SIPs (monthly, quarterly, half-yearly or yearly) for a prolonged period say 15-20 years. You get to experience the compounding effect only when you stay invested for more than a decade or so. You can choose between equity, hybrid and debt mutual funds depending on how the earnings you are looking for, and how much money you would need in future.

Alternatively, you may invest in shares depending on your understanding of the companies’ valuations and the stock markets.

Choose high-yielding investments

You cannot hope for good returns without taking the necessary risk. Look for investment options that yield high returns. You can start by looking at the various equity funds that have earned consistently high returns over the past five years. You can choose from the funds depending on your understanding of various sectors and themes. For example, you may choose from the sectoral/thematic funds or simply choose between large-cap, flexicap and small-cap mutual funds.

Expecting 20 per cent returns year on year is a farce. Your expectations must be realistic depending on market conditions. However, a second source of earning coupled with your ability to invest regularly for long periods can help you reach your financial goals.

Save on taxes

Do not underestimate the need for savings. A penny saved is a dollar earned. While investing your money, check if you earn tax benefits too. Be it parking money in simple debt instruments like public provident fund, employees’ provident fund, ELSS funds or buying health insurance or taking a home loan, check how much money you can save through tax deductions. You can avail of an additional income tax deduction of 50,000 by putting your money in theNational Pension Scheme (NPS), thus, availing you of both good returns and necessary income tax benefits.

This way you can save the money that you would have otherwise lost in paying income tax

First Published: 06 Apr 2022, 10:29 AM IST