How about a second monthly income?

How do you spend your time in the month ends? More work at office, less time for your family and of course a shortage of cash. Following the recommended course of action suggested by these articles will definitely help you to be wealthy and happy. But creating that space may require a little more time and of-course a disciplined approach. However this shortage of cash at the month ends may be fixed up if you follow the actions suggested in the following write-up.

Let’s discuss about the basic tenet of creating this additional money flow. We would look at every possible way to make sure that your money earns that extra bit. Remember that the ocean is made up of small but countless number of water drops.

Never keep your short term fund idle

We always need to maintain a certain level of ready cash. The amount of cash to be maintained may vary from person to person depending on their transaction and contingency needs.

One of the primary ideas is to avoid parking a large part of your short term surplus cash in a savings account. The savings account pays an interest, but the interest you will receive is generally lesser than the rate at which your money is losing its purchasing power because of inflation. . Let’s take example of your salary which entirely gets credited to account in the beginning of the month. Expenses, on the other hand is spread over the month: therefore a part of the salary proceeds remains idle during the month. If you can park this money in the cash funds (popularly known as liquid fund) – we may earn a better return than if we keep it idle.

This is also applicable to corporates where transaction money remains idle. The business here can use these liquid funds to earn that extra bit.

Know more about Liquid Funds from SBI Mutual Funds

Creating a regular source of income for your regular expenses

There are certain regular expenses you can’t ignore. Paying pocket money to your kid is one such expense. One option is paying him from your current income. But isn’t it difficult to keep track of it this way. Also you would like to make your kid financially more responsible. Here you may use a MIP (Monthly Income Plan), whose primary objective is to provide a regular income to the investor. The steps you need to follow here are:-

  • Decide the average amount of monthly pocket money you wish to give to your kid
  • Calculate the lump sum which will generate a cash flow equal to this pocket money
  • Invest the lump sum in a Monthly Income Plan (MIP). Know more about SBI Magnum Monthly Income Plan
  • Get regular dividend, which is allocated to the child

This way you save the regular hassle of keeping track of child expenses as well as make your child a financially literate citizen.

The same idea may be used for generating a cash flow for your parents or for any other near and dear ones.

Know more about SBI Magnum Monthly Income Plan

Get yourself a yearly bonus

Who won't like a fat yearly bonus? And think if it doesn’t depend on your employer. You may use this lump sum in so many ways: it can be used to enjoy more during the festive seasons, for that yearly family trip you always would like to take or for buying a new set of furnishing for your home. An investment in MIP can do the trick here without hampering your regular budget. Cumulate your monthly dividend in a liquid fund – and then take it out in lump sum. You will really enjoy the magic of creating and then paying yourself the big fat bonus.

Another alternate here is to use the Income Fund. This you would prefer if you wish a smoother ride. You may get a little less here but then you get it extra – remember. What you need here is to invest your money in the Income Fund and then take a yearly dividend. Sounds interesting – it is interesting indeed.

Know more about SBI Magnum Monthly Income Plan

A monthly paycheck after you retire

The whole discussion of passive income doesn’t end without considering the retired phase of your life. No more monthly pay check from your employer or from your business. Does your expense stop? No – but then an investment in MIP will ensure that pay check do not stop coming. And you enjoy a financially free and truly rewarding life.

Conclusion

"The main difference between the rich and the middle class is that the rich invest their money in passive income streams. When their passive income exceeds their expenses, then they are financially free. Financially free simply means that you do not have to have a day job to pay your expenses. And you are free to then do whatever you want!"

Robert Kiyosaki in Rich Dad Poor Dad

Disclaimer
Risk Factors: Mutual Funds and Securities Investments are subject to market risks and there is no assurance or guarantee that the objective of scheme(s)/plan(s) will be achieved. As with any other investment in securities, the NAV of the Magnums/Units issued under the scheme(s)/plan(s) can go up or down depending on the factors and forces affecting the securities market. Past performance of the Sponsor/AMC/Mutual Fund/Scheme(s)/Plan(s) and their affiliates do not indicate the future performance of the scheme(s) of the Mutual Fund. Statutory Details: SBI Mutual Fund has been set up as a Trust under The Indian Trusts Act, 1882. State Bank of India (‘SBI’), the sponsor is not responsible or liable for any loss resulting from the operation of the schemes beyond the initial contribution made by it of an amount of Rs. 5 lacs towards setting up of the Mutual Fund. Asset Management Company: SBI Funds Management Private Limited (A joint venture with SBI and AMUNDI). Trustee Company: SBI Mutual Fund Trustee Company Private Limited. Please read the Scheme Information Document carefully before investing. Prospective investors are requested to read the scheme information document before making any decision of investment. Investors are also strictly advised to consult their legal, tax and financial consultants before making any decision of investment. The AMC takes no responsibility of updating any details/ information in the material. The AMC/ Mutual Fund shall not be responsible for any loss, damage or any nature arising from the use of this material. 

This information is given for general purposes only. These views alone are not sufficient and should not be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All recipients / readers of this material should before dealing and or taking any decision of investment are advised to carefully review the Scheme Information Document and consult their legal, tax and financial advisors before making an investment decision. All opinions and estimates included here constitute our view as of this date and are subject to change without notice.

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