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- Are You Financially Ready?
Make the right money moves: How financially ready are you?
1. What is the first thing you should focus on upon receiving your first salary?
Correct option is A - An emergency fund acts as a financial cushion in the face of emergencies such as job loss, medical emergencies, etc. Ideally, it should cover your monthly expenses for 6 to 12 months. As exciting as receiving your first salary is, for effective money management, focus on saving for an emergency fund. It is needed to work toward financial stability.
2. If you earn ₹50,000 monthly, what is the best way to use and manage your money?
Correct option is A - The simplest and most effective means to inculcate financial discipline is through budgeting. A popular format is the 50/30/20 budget rule which suggests that 50% of your monthly income goes toward taking care of your needs, 30% for wants, and 20% for investing and saving. During the early years of your career, sticking to this rule encourages regular saving and investing without creating a sense of deprivation.
3. If you want to apply for a credit card, what factor matters the most?
Correct option is D - Depending on the bank or the issuer, the conditions needed to fulfil to apply for a credit card vary. Some essential factors to consider are your credit score, interest rates, repayment terms, and the annual fees and charges. For instance, having a healthy credit score increases the chances of obtaining more favourable terms.
4. What is the need for health insurance, especially when you are young and healthy?
Correct option is D - Health insurance is an essential asset in today’s world of rising healthcare costs and inflation. This isn’t something only the elderly require. Buying health insurance as early as possible helps obtain additional benefits such as lower premiums, lower waiting periods for pre-existing health conditions, and continuous coverage. The tax deductions which can be availed are merely a bonus but the primary reason is to ensure a medical emergency doesn’t create a financial crisis.
5. You have started investing in a Systematic Investment Plan (SIP) and after a few months, the markets decline. What should you do?
Correct option is B - A Systematic Investment Plan (SIP), is one of the popular means to invest in mutual funds. Through this, a fixed amount is regularly invested at predetermined intervals. While investing in SIP, consistency and a long investment horizon are two factors that affect your overall returns. Markets are volatile and their performance will change over the years. Instead of panicking, stick to your investment plan as long as you are on the right track. Consult a professional if needed before quitting. For instance, the returns generated by a SIP for 5 years will be lower than those generated over 20 years.
6. If you are interested in long-term wealth creation via investing, then which of the following habits will help?
Correct option is A - For long-term wealth creation, investing is needed. However, it’s not just about choosing the right set of investment or the one that offers the highest return. Instead, it requires disciplined and strategic investing. By increasing your contribution to a Systematic Investment Plan (SIP), the chances of wealth creation increase. For instance, even increasing your monthly contribution by a fraction might help accumulate a bigger corpus.
7. If your primary financial goals are tax reduction and wealth building, which of the following options will help you achieve this?
Correct option is B - Equity Linked Savings Schemes (ELSS) are mutual funds that not only help in wealth creation by investing in equities but also offer tax benefits under Section 80C of the Income Tax Act. You can claim a deduction of up to ₹1.5 lakh per year under the old tax regime, and since the funds are market-linked, they have the potential to generate higher returns over the long term, helping you build wealth.
8. What would your reasons be to shift to the new tax regime?
Correct option is C - The new tax regime offers a significantly lower tax rate but doesn’t accommodate as many deductions, especially under Sections 80C, HRA, etc. However, if your salary structure is straightforward and you don’t have many deductions to claim, you can benefit from a lower slab rate.
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90% Score
7 answers out of 8 questions attempted correctly.
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Disclaimer
This content is intended solely for informational purposes. The views expressed in this content are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this content.
