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Alternate income starter pack: Shedding flawed money habits & investing judiciously

ET Spotlight
Personal milestones in life have been synonymous with reaching critical points in your life. From taking the first trip abroad to getting the first full-time job, from moving out of a guardian’s house to moving in with a significant other, from having the first child to getting retired - life gives us many reasons to celebrate. But the reality is that while money can make the world go round, not being cautious about spending it can lead to financial stress. Let’s be honest here: making an impulse purchase is kind of fun—at least in the moment. But one should realise that engaging in impulse buying will only induce guilt and stress later, which could cause undue financial and mental strain. As per a research* done by IIT Kharagpur, Indian men and women are equally prone to impulse buying.

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Talking of tensity, we’ve all got company - nearly 9 in 10 Indians suffer from stress. Findings of a survey** show that stress levels are higher in India compared with other developed and emerging countries, including the United States, the UK, Germany, France, China, Brazil and Indonesia.


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In the long list of causes, money seems to top the chart. Several studies indicate a jump in depression and anxiety-related disorders over the past six months. Keeping in mind the current economic slowdown, a study*** conducted by Cosmos Institute of Mental Health and Behavioural Sciences (CIMBS) shows a threefold increase in degenerating mental health among senior professionals. According to Optum, a top provider of employee-assistance programmes to companies, stress-related complaints from employees have doubled from a year earlier to 16% in 2019. That means more sleepless nights, bouts of anxiety and shooting blood pressure over money matters.

One solution that can shield you against financial strain and tackle the added responsibilities and expenses is earning a second income. It helps in planning for key life stages such as marriage, parenthood, retirement, etc.and prepares us for these expenses.

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Well, there are ways you can earn second income and here is the starter pack - shedding flawed money habits, and investing wisely. To begin with, here are a few habits to break and make some side hustle cash:

Toxic habit 1: Debts are one of the biggest causes of stress.
Cutting out things from the budget (like the extra morning lattes, dinners out, and new clothes that you don’t need) and putting that money toward paying off credit card debt instead can help one value more than these extras: financial freedom and peace of mind.

Second income idea: Launching a service business can be done without a large network, an online presence or much overhead. Begin with a business like dinner catering, freelance writing or online marketing. Online tutoring is another great way to gather money and pay debts off. You could tutor a subject like math or science, while also teaching a language if you're bilingual. You could tutor musical instruments like the guitar or piano, along with many other subject matters online. Start by crafting an effective outreach email.

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Toxic habit 2: EMIs and insurance premiums are priority, not discretionary spends.

Second income idea: In case of genuine cash flow issues, communicating with the institutions for a reschedule or premium holiday can help avoid bigger problems. To take care of monthly installments, nail down a few thousands of rupees a month by leveraging the sharing economy. Rent out your spare bedroom or basement on Airbnb. Rent out your car on Uber/Ola and bike to work or carpool instead.

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Toxic habit 3: Dipping into either of the emergency fund or goal corpus will lead to zero money for real contingencies.

Second income idea: Instead, launch your own online store and build a customer base. But that will involve wearing many different hats. Instead, you could sell a product and develop a presence directly on existing e-comm websites without the need to take on so many roles.

Toxic habit 4: Salary hike is not a solution to overspending.

If discretionary spends lead one to run out of money, a higher salary will just mean more disposable income to spend. They will still run out of money.

Second income idea: Getting a salary hike is pretty exciting and you get all sorts of ideas on how you are going to spend this extra money. But before you plan for your next vacation or a big-ticket purchase, pause…and take a step back. This surplus money can actually make way for an additional income. Channel your increased salary towards building your investment capital. Let your financial goals dictate your investment choices, and stay completely aware of the expected returns, risks involved and the tax component attached to each investment instrument.

HDFC Life Sanchay Plus is one plan that offers guaranteed returns for you and your family, almost acting as a second income. Long term income option of HDFC Life Sanchay Plus ensures a maturity benefit for a fixed term of 25 or 30 years, resulting in a guaranteed income for you. Plus, you get return of premium at the end of the payout period. The advantages extend to life cover, tax benefits, and flexibility to choose guaranteed benefits in the form of regular payouts or a lump sum amount.

Trying to save money at an early age might appear to be a herculean task but if planned properly, it could prove beneficial. An investment guarantees that your finances are safe from binge-spending. And no, your expenses need not go up with an income hike. Suppose when your salary is 100 rupees, you are spending 60 rupees and saving the rest. If your salary increases by 20 per cent to Rs 120, your expenses need not go up by 20 per cent. This is because Rs 60 is already covering your fixed expenses. This productive use of your money will ensure a better quality of life in the future.In order to bring a real change to your financial behavior, reflect on what you have spent over the past month to develop a reasonable budget for the future. Figure out what is making you feel so unhappy about your finances? Do you wish you could buy something? Do you want to spend less? Identify your stressor and then set a goal for yourself. Note down what you need to do to get moving in the right direction - paying bills or debts, organising your savings, or making more money. Investing early in order to stay out of money problems is one of the most concrete steps toward financial health.

References:
* https://timesofindia.indiatimes.com/india/not-just-women-men-shop-on-impulse-too-survey/articleshow/65190769.cms
** https://economictimes.indiatimes.com/wealth/personal-finance-news/82-indians-bogged-down-by-stress-cigna-360-well-being-study/articleshow/68615097.cms?from=mdr
*** https://economictimes.indiatimes.com/jobs/with-economy-in-downturn-india-incs-senior-executives-grapple-with-severe-mental-stress/articleshow/71159786.cms



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