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How can I increase my income with a low income and contractual job in a small town in Odisha?

Ramalingam Kalirajan |8500 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Nov 01, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Khirod on Oct 22, 2024Hindi

Hello Patel Sir, I am a middle class person income of Rs. 25000/- pm through contractual job resides in small town in Odisha. How could I increase my income by investing or doing extra work in future .

Ans: Your question reflects a sincere and goal-oriented approach towards financial growth. With careful planning and some extra efforts, you can lay the groundwork for increasing your income, whether through investments or additional sources of income. Below, let’s discuss actionable and effective strategies for increasing your income from a 360-degree perspective.

1. Assess and Optimise Your Monthly Budget

Understanding your spending is the first step. Track your expenses to identify savings. Prioritising your essential expenses helps you set aside funds for investments. Even small savings can compound into a solid base over time.

2. Start Building an Emergency Fund

An emergency fund safeguards you during unexpected times. Aim to set aside at least six months’ worth of expenses. Use a liquid fund or recurring deposit, which keeps funds accessible and offers moderate returns. Once stable, move to long-term investments.

3. Increase Skills and Seek Additional Job Opportunities

Improving your skills can open doors to better job opportunities. Look for skill courses in your field or learn something new online. Skilled professionals can command higher pay, whether in current roles or new opportunities. Additionally, part-time freelance or contract work is a viable option. Platforms like Upwork or Fiverr connect you to work-from-home opportunities, bringing extra income.

4. Systematic Investment in Mutual Funds

Mutual funds can be a significant addition to your income-building strategy. As a beginner, consider starting small, investing as little as Rs. 500 to Rs. 1,000 each month. SIPs (Systematic Investment Plans) are accessible, offer compounding growth, and support disciplined investing. Avoid direct funds as these can be challenging to track and manage. Opting for regular plans through a trusted CFP is advisable. A Certified Financial Planner can help you select funds aligned with your financial goals and needs. Regular plans offer the advantage of continuous guidance, portfolio reviews, and support from financial experts.

5. Side Business or Passive Income Options

Consider starting a small side business or exploring passive income options. If you have skills like cooking, gardening, or teaching, you can monetise these in your local community. Passive income options like creating content online or renting equipment may require some initial work but generate consistent revenue. Research local demand to choose the best opportunities in your area.

6. Low-Cost Investment Options

To maximise returns, choose cost-effective investments. For instance, actively managed mutual funds help outperform standard returns, unlike index funds which may not suit your goal of increasing income. Actively managed funds enable you to benefit from expert decision-making, improving growth prospects. Index funds lack flexibility and often fall short in uncertain markets.

7. Avoid Insurance-Linked Investments

Since you are considering investments, avoid mixing insurance with investment, like ULIPs or endowment plans. Insurance-linked investments often have higher fees, locking you into long terms without high returns. Opt for pure insurance for protection and separate investments for growth.

8. Focus on Equity-Oriented Funds for Higher Returns

Equity mutual funds can offer higher returns but come with market-related risks. If you invest with a long-term horizon of 5-7 years, equity mutual funds can be rewarding. They require patience, but equity-based funds have a history of outperforming inflation, making them suitable for your income-increasing goal. Stay invested and avoid frequent withdrawals to benefit from compounding.

9. Create a Long-Term Investment Plan

A well-structured investment plan helps you achieve both short and long-term goals. Alongside monthly investments in mutual funds, create a roadmap for career progression, additional skills, and other investment avenues. A long-term plan provides stability and keeps you on track to increasing income and wealth.

10. Look into Debt Mutual Funds for Stability

Debt mutual funds are suitable for shorter-term goals, offering stability with low to moderate returns. When you need capital preservation or prefer steady growth, debt funds serve well. While equity offers growth, debt funds balance your portfolio. Remember, income from debt funds is taxed based on your tax slab.

11. Minimise Tax Liability on Gains

Investing in mutual funds comes with tax implications. Equity mutual funds are taxed on long-term gains over Rs. 1.25 lakh at 12.5%, and short-term gains at 20%. Proper planning can help you minimise tax outgo, maximising returns.

12. Review and Adjust Portfolio Regularly

As a beginner, you might need help with adjusting investments. Working with a Certified Financial Planner can ensure your portfolio is regularly reviewed and adjusted as per market conditions. This guidance is beneficial in maximising returns and staying on track with your financial goals.

Final Insights

Increasing income requires a balance between smart investments and skill development. By focusing on regular investments, building skills, and exploring passive income, you lay a strong foundation for financial growth. Working closely with a Certified Financial Planner helps ensure your investments align with your goals, providing the guidance you need to progress confidently.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.