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Financial Planning

5 Steps to help you get a kick start for Financial Year 2017- 2018

21 April 2017
Want to avoid scrambling for investments and taxes during February and March? Start planning your finances now.
 

Here are a few steps that can help you plan your finances in a seamless and effective manner to get the best possible results from your investments and savings.

  1. Review your finances

Make a list of small and big expenses you have incurred. Next, list all the necessary payments, such as rent, EMIs and school fees, and take into account other large payments such as vacations, appliance and furniture shopping for the home. This will give you an idea of where your money has gone in the previous year.

  1. Take stock, take responsibility

Now, take stock of the situation and further divide the lists that you have generated. Highlight the ones you can avoid or cut down on. For example, if you have eaten out frequently during the week, try bringing that number down. You could pull up your debit and credit card statements to figure out how often you swiped your card for this. Plan your eating out and entertainment dates to reduce expenses. This is also a good time to set a savings target for the current financial year. Whether it is Rs. 100,000 or 500,000 or higher, cutting back on some expenses, can help you achieve this target or come close to it.

Related: 6 Actionable Money Tips

  1. Divide and rule:

This starts with your income. Divide it into 50 - 30 - 20. 50% is what takes care of all your immediate needs such as grocery, school fees, rent, and other living expenses, including any EMIs and other costs for travelling to work or school. 30% is what goes into your investments such as mutual funds and retirement funds, and other such savings. The remaining 20% is what you can spend on eating out and entertainment.

  1. Re-assess your investment portfolio

How much have you invested in mutual funds, real estate, gold or ULIPs? The answer to these questions tells you how well your portfolio is balanced. Ideally, you should invest more in Equity (through various instruments) when you are younger, and less as you age. For example, if you are 25 years-old, a good thumb rule would be to invest 100-25=75% in Equity, and the rest in Debt. Sit down with your financial advisor or CA to understand where you should invest to save tax, grow your wealth, and plan for future goals.

Planning your investments in advance can help you save on taxes. Some financial products that you could consider for saving tax and growing wealth include:

  • ULIP (Unit Linked Insurance Plan)
  • Monthly SIPs in ELSS
  • Public Provident Fund
  • Postal Plans
  • Recurring Deposits
  • National Pension Scheme

You can also opt for health and life insurance to save tax. Like the instruments mentioned above, these can be paid in monthly instalments. However, you need to ensure you choose a monthly, quarterly or half-yearly option when buying a policy. This is especially useful for those who cannot arrange lump sum amounts for investing at the end of the fiscal year.

Related: Simple ways to diversify your financial portfolio

  1. Go Cashless

Apart from the fact that you don’t have to worry about getting change for high denomination notes, there are several benefits of going cashless. For instance, using cards to make payments allows you to keep a record of all your spending. Additionally, some payment apps and digital wallets offer incentives in the form of cash-backs and discounts, which can work in your favour. Here are some more benefits of going cashless.

Last but not least, Know Your Rights because knowledge is power!

When you file for taxes, be fully aware of the rebates that you can claim on property, pension plans and other schemes.

When you are choosing between investments, make sure you know all the options available.

When you choose an investment, make sure you read the Terms and Conditions carefully. 

When you are looking to save tax, make sure you know which section to claim under.

Here’s hoping FY 2017-2018 is the year of your financial awakening!

 

Disclaimer: This article is intended for general information purposes only and should not be construed as investment, insurance, tax or legal advice.You are encouraged to separately obtain independent advice when making decisions in these areas.

 
 
 

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