Here are few things to make it even better
A new calendar year comes up with lots of commitment
Hare are few things to consolidate and take stock of in the FY 2019-20, for a better control of one’s finances in the year ahead.
1. Put a plan in place
Do not initiate making any investments, tax saving or buying insurance unless you have a financial plan in place. Making financial decisions on ad-hoc basic might be financially damaging in the long run. There is a greater possibility of not making the right provision for your needs, making untimely entry and exits from investments etc. if a plan does not exits
2. Prepare a budget
Before you start planning your financial, tracking your expenses is equally important, but the very thought of maintaining a budget drives a lot of us into depression. But it’s not required to take note of all petty expenses or keep one bogged down with the thought of accounting all income and expenses.
The idea is to help you set household expenses at a level that allows you to enjoy the desired standard of living and simultaneously save for future needs. The aim will be to cut down on some of the non-discretionary expenses. Therefore, preparing, analyzing and monitoring your personal budget are some essential steps you should take before you start your personal financial planning
3. Get cover for life and medical needs
If you have financial dependents, get a medical and a life cover, even before you start investing. As a thumb rule, buy life cover of at least ten times of one’s annual income only through a pure term insurance plan and keeps reviewing every five years as par liabilities. For health insurance, young families can opt for family floater health insurance plans for an adequate coverage.
4. Save funds for emergency
In the absence of an emergency fund, if financial emergency strikes, it becomes imminent to dip into the existing investments. So, create an emergency fund to meet any uncertain financial need. An emergency fund is not for but only to act as a safety net. As a thumb rule, three to six month’s household expenses can be one’s emergency fund. The amount should give you the confidence to combat financial
5. Identify goal-posts
Starting to save without putting the goals in sight may throw the financial decisions out-of-gear. set your goals in sight and create a separate plan to achieve each one of them. setting goals in advance help in proper utilization of available resources i.e. investable surplus. It gives you the reason to follow the approach of – ‘Income minus saving equals to expenses’ rather than “Income minus expenses equal to saving’.
Remember, goal setting is only a part of overall financial planning process which entails meeting life’s goals through proper management of finances. Goal-setting starts with identifying various short-medium-long term goals. The identified goals need to be well-defined by assigning it a value it. It also helps in proper linking of the goal to an investment.
Thereafter, identifying and estimating the requirement after adjusting for inflation takes place A post-graduate course costing Rs 9 lakhs today may swell to more than double in 15 years’ time! Lastly one has to come up with a strategy or a plan for meeting the goals under the current situation while keeping the future goals in perspective The choice of the asset-class or the investment product comes last in the process. For better results, one may take the assistance of a financial planner while undergoing this exercise
6. Streamlining investment portfolio
Only once you have finished your goal-setting, consider the appropriate investment for them. While choosing investments, keep an eye on taxability (on income), liquidity and underlying asset class. Moreover, link each investment to a specific goal to avoid any early exits based on market conditions or to meet ad-hoc household expenses. choose to go with equity-oriented products such as equity mutual funds for long-term goals while debt-based products such as debt funds be used for medium-term goals.
Based on your tax saving needs and long-term goals, choose to go with ELSS Equity-linked savings scheme (ELSS) is a type of mutual fund, which similar to any diversified equity mutual fund routes investments into the equity market. it, however, comes with some intrinsic features. It stands apart from a normal mutual fund as it carries a tax benefit on the amount invested and thereby, has a lock-in period for fund invested for a period of 3-years.
Further, start SIP if you haven’t started it yet. Link the investments in SIPs to your long-term goals such as children needs, retirement, etc. SIPs help you profit from volatility by automatically buying you more units when prices are falling and fewer units when
7. Estimate your income for 2019-20
Tax planning is an essential part of your financial plan. Start with asking your accounts department to restructure your salary components, if possible, as it is also a part of tax planning. Thereafter, account for any increment or bonus that you could be eligible for in the FY 2019-20. Try to estimate the year’s total taxable income from all sources and calculate the tax liability on the same. Unless, one knows how much the tax liability is, investing under Section 80C can wait.
8. Submitting from 15G/H
If your interest income exceeds Rs 10,000 (Rs 50,000 for seniors) in a year, the bank will deduct a 10% tax at source, or TDS. A times, there could be more than one deposit in different branches of the same bank. The interest amount is added up for the TDS purpose.
However, you can submit a declaration From 15G and 15H to avoid TDS on interest income. One can submit these forms only when the tax on total income is nil and the aggregate of the interest received during the financial year does not exceed the basic exemption slab of Rs 2.5 lakhs. while from 15G is for individuals below 60 years, HUFs and Trusts, From 15H is for individuals above 60 years of age. if bank deposits are for more than a year and one is eligible for submission of forms, ensure to submit them every year, better in April itself. TDS is also applicable on interest and recurring deposits.
9. Committed outflows
At the start of the FY, making provisions for yearly commitments such as premium payments towards life and health insurance policies, PPF, NPS etc. helps. Remember, come what may, these are previously committed investments and needs payments to be made each year for their continutiy. It is better to spread them over different months to avoid outflows in 1-2 months thus impacting your household budget.
While equity-backed investments help one to create a corpus for long-term goals, it’s important to de-risk as one nears those goals. Only those investors who are nearing their goals may start shifting funds from equities to less volatile debt assets especially during the last three years from your goal. New and young investors need not worry about this strategy now.
It’s the beginning of a new FY and the stock markets are at a high and the interest rate is lying low. Existing investors may use the current opportunity to review their investment portfolio. Look for laggards and switch them with good performers after considering their long-term performance. New investors may review consistency and performance of their investments every 24-36 months to take corrective actions. Review your investible surplus and amount toward the goaals.
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