When Bengaluru-based Neerja Roy, 40, wanted to quit her corporate job to pursue her passion for music, she knew she would really have to manage her finances well to be able to sustain all her needs.
While she is married and the couple don’t have a child, she needs to regularly contribute to the family expenses. To maintain the fund flow, she took to freelancing along with her music,
but the payments were often erratic, sometimes even once in three months, which did not help.
“It was then that I really had to fall back on my investments for a monthly income. I had invested in a recurring deposit, from which I get monthly income. This helps me with a lot of my expenses,” says Roy.
This is why it is important for people with irregular income to figure out investments that can provide with some regular payouts.
Says Suresh Sadagopan, founder and principal of Ladder7 Financial Advisories: “To establish a stable income, consider investing in debt-oriented instruments like corporate fixed deposits or bonds. They can provide monthly or quarterly payouts that ensure a steady inflow. Debt mutual funds with a systematic withdrawal plan (SWP) are also a tax-efficient option thanks to the short-term capital gains (STCG) treatment.”
Abhishek Kumar, founder and chief investment advisor at SahajMoney, emphasises that people with unstable incomes need to make sure that the investment they count on for managing their monthly cash flow deficit should be into low-risk assets.
1] Post Office Monthly Income Scheme (MIS): Imagine if your savings can generate a monthly paycheque. Post office MIS is a fantastic choice for those seeking regular, low-risk income.
Says Kumar: “With a five-year lock-in period, it can be reinvested for another five years after maturity. Keep in mind that the interest income is taxed according to your income tax slab rate.”
2] Systematic Withdrawal Plan (SWP): Are you ready to invest a lump sum from a windfall income? Consider parking it in a debt mutual fund and setting up an SWP. This will allow you to receive a consistent monthly income. However, be aware that capital gains from SWP are taxed based on your income tax slab rate, so plan accordingly.
3] Real Estate: It would also be wise to diversify your portfolio into real estate during the high-earning years of your life.
Says Kumar: “Rental income from properties can provide a reliable monthly income stream.
For those who can manage with quarterly dividends, real estate investment trusts (Reits) are worth exploring. Remember that both rental and dividend income are taxed according to your income tax slab rate.”
In a world where financial stability can be as elusive as hitting the high notes, smart investments can be your financial backup vocalists. So, like Neerja, take the leap toward your dreams, secure in the knowledge that your investments can keep the music playing even on uncertain financial stages. After all, with the right investment ensemble, your financial future can hit all the right notes!