Planning your taxes from the first day of the new financial year ensures you can do maximum investments and tax saving without worrying about last-minute jitters.
The tax saving efforts and overdrive of March-end usually makes way for some lethargy by the end of April with many taking it easy. However, the new financial year is crucial as it not only brings in new and increased expenses like children’s tuition fees or rent but also a good progression in terms of promotion and salary increment. Therefore, it makes sense to ensure financial optimisation right from the first month of the financial year. This step would not only ensure optimum financial savings and investments but also keep the last minute financial year ending stress at bay.
Here are five financial steps that you should take in the new financial year.
Make A Financial Plan For The Year
The financial plan that you adhered to in the last financial year may need to be relooked and tweaked as per your new needs. There may be changes in your life with an increase in salary or earnings, a new addition to your family or elderly parents looking for medical help. Your financial plan should be streamlined keeping all these changes in focus. Thus, the first few weeks of a fresh financial year is the best time to set new goals. For example, if your father or mother recently got retired, they may no longer have a cushion of a Health Insurance. You can opt for a health insurance plan for them, which will also help you in getting deduction benefits.
Avoid Multiple Accounts
The first few weeks or the first month of the financial year is the best time to evaluate your number of accounts, cards, loans etc. and getting rid of the ones which are not in use. Many salaried individuals end up having multiple salaried accounts which they no longer use. Similarly, many cardholders opt for multiple Credit Cards which end up draining their financial resources with the payment of interest, annual fees and late fees etc. This financial year you can make a fresh start and clear the financial clutter by closing down unwanted bank accounts, loans and credit cards.
Plan Investments Wisely
The beginning of the financial year is the best time to plan your investments wisely. If Life Insurance is what you need, then this may be the appropriate time to opt for one to ensure protection component for the full financial year rather than looking at it as just a tax saving instrument. Likewise, understanding one’s financial needs and goals early in the FY helps to choose the right investment vehicle to fulfill the individual needs. De-risking when the financial goal is nearer is another component often overlooked. The closer you are to your financial goals warrants for a change from any high-risk investments like equity to safer options like debt. The FY beginnings are often the best time to undertake such risk evaluation and investment planning.
Focus On Tax Planning Rather Than Tax Saving
Tax planning is something which is planned as per your short and long-term financial needs and goals. Tax saving, unlike tax planning, may not help you in picking up the right investment option as per your needs and financial goals. For example, the reintroduction of LTCG tax on equity investments including equity mutual funds should not deter you from investing in the financial market if the returns suit your long-term financial goals.
Create An Emergency Fund
An uncalled emergency has the potential to spoil your investments plan and disrupt your tax outgo. Therefore, it is always wise to have an emergency fund in place. The beginning of the FY is the best time to start with an emergency fund ensuring all your investments and tax planning stays put for the entire duration of the financial year.
The smart steps discussed here would ensure financial peace during the entire year and will save you from last minute tax saving jitters.