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Wealth Guide: How to stay ahead of inflation through money management and investments? Expert suggests these tips

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Wealth Guide: Inflation is at its peak right now and everyone knows it either from their experience in the market or from their daily needs. Even governments and central banks across the world are looking for a way to address inflation and in the same direction, the Reserve Bank of India (RBI) increased the repo rates to create a better scenario for rising inflation. Amit Gupta, MD, SAG Infotech, suggests some tips on how to reduce the burden of rising inflation through better management of our money as well as investments.

Think About the next 2-3 years before Prepayment

“You need to be mentally and financially prepared while repaying the existing loans for a long time. All of this is to assure that the lenders are prepared for any unexpected eventuality that may occur in the future. Before planning for prepayment you should think about repayment for a year or two,” Amit Gupta said.

Rise your investments for other goals

“Increase your investments by focusing on some other goals. This will cover the investors financially despite the current struggle of our economy,” Gupta added.

Regular Repayment in Small Packets

“Regular repayments in small pockets on your home loan are a good option. Ideally, 5% of the unpaid amount is the most optimized way to close your home loan, but payment of an additional EMI every year can nullify the impact of the hikes in rates. Paying for a single extra EMI each year would ease the impact of the repo rate turning high and so does the burden on the investor’s pocket become less,” he suggested.

Keep Money aside as Emergency Funds

“An emergency fund is as important and everyone should have a fixed emergency fund. This is a way to avoid any future debt in case of an emergency. Set aside a good amount for you and your family as an emergency fund. It should be equal to 3-6 months of current income,” he explained.

Adjust your Savings

“You can distinguish financial motives that are bounded by certain priorities, investment time frame, and corpus requirements, and start saving accordingly. By starting to save for certain goals particularly, you can able to acquire your specific goals in time,” he further said.

FDs are not enough, think about long-term equity

“Despite a hike in FD rates and modest savings, it will not be enough to build a corpus. So invest in long-term equities. Generally, FDs may seem like an attractive option for investment, but the best long-term financial goal is equity investments,” he opined.

Get the most out of rising interest rates

“One capital is not enough in the present scenarios where inflation is very common. Continue with short-term FDs and small savings schemes for capital protection for goals that are short-term. You can also keep tenure short and ladder-fixed return instruments to make the most of rising interest rates,” he said.

Keep the FDs properly intact

“Investors may be tempted to break existing FDs and reinvest the amount to take advantage of the hike in interest rates. However, it is strongly advised to keep your FDs intact otherwise it will reduce the interest income from these investments,” he added.

Increase your savings by 1 to 5% annually

“Try to rise your savings by 5% annually. If 5% is not possible then go for at least 1% or whatever fits according to your financial situation but increase the amount you save to stay ahead of the inflation and future responsibilities,” he suggested.

Health Cover and life insurance

“Get the assurance of having sufficient life insurance covering your family as well as your personal health to protect your family financially in case of any uncertain emergency,” he concluded.