Thursday, 14 July 2016

7th CPC: Key things you should avoid doing with the additional money

7th Pay Commission: Key things you should avoid doing with the additional money

New Delhi: Very soon fresh hike in salaries will be visible due to implementation of recommendations made by the 7th Pay Commission to the government. However, it’s highly recommended that the additional money you receive is invested wisely. You should not indulge in impulsive purchases and ensure the money is used to meet your long-term financial goals. So, the money should be utilized judiciously.

Here are key things you should avoid doing with the additional money:


1) Don’t purchase additional vehicle, house
It’s advisable that you must not go for a fresh purchase of vehicle when the current one is already serving your purpose and you have other important financial goals to meet. Value of vehicle only depreciates with time and hence, doesn’t qualify as a very good choice.

What for are you purchasing a new house, if you already have a good enough residential area to live in? In case you are planning to rent a house, idea is not bad, but not best even. If you are a wise man, you will always go for a loan in addition to an amount you already have so as to observe tax benefits. However, on rough calculation, rent will only provide you yield of 2 percent against the loan cost of about 10 percent in addition to the processing fees. Also, there is no guarantee, the area that you want to rent finds a tenant as soon as you want. Same is true in the case you wan to sell the apartment considering weak realty market.

2) No need for additional foreign holiday
No logic justifies spend on additional foreign holiday in place of important financial investments. Although, you can avail tax relief on vacations in India, twice in four years, it’s not a good idea by any means.

3) Avoid unnecessary shopping
This is the common ailment that almost every Indian suffers from. When on shopping spree, we generally forget, when to start and where to stop.

4) Be judicious in gold purchase
Financial advisors always advise to only buy gold as safe haven. If you have better investment options in front of you such as tax-free bonds, ETFs and mutual funds, avoid purchase of the bullion as the returns are much less here.

5) No need for prepayment of home loans
It’s always advised that you should not prepay home loan since it provides tax benefits that actually make the loan cheap. You better pay your outstanding loans in form of credit card balances and others.

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