Plan well in advance to enjoy the benefits
March end always presents a chance to chalk out your financial plans for the new financial year. Several variables can come into play around this time, which includes a potential rise in your income, your learnings from the past year, and planning for any expenses you might foresee in the short or long term.
As always, it helps to take a holistic view of your goals and estimate the means to arrive at them before factoring the same into your financial calculations.
Methodical Approach
A tuned and well-synchronized approach always pays when it comes to finances. Chart out your estimated annual income, set aside an amount each month to channel towards savings and investments through the year.
If you are a mutual fund investor, a Systematic Investment Plan (SIP) is a great tool that will help you expedite this. Also, consider channelling additional funds into short-term debt instruments such as Liquid Funds to supersede the returns of a savings bank account.
In addition, always remain on top of the latest rules and regulations. For example, if you have not completed your supplementary KYC or linked your Aadhaar, it’s time you did so.
Tax Saving
A cornerstone of your annual financial plan is to abide by the old adage of ‘tax saved is money gained’. There are several tax saving instruments available for investors in India, and depending on your risk appetite, you can pick one over the other. If you have the risk tolerance for equity-based tax saving instruments, an Equity Linked Saving Scheme (ELSS) with its relatively slender 3-year lock-in period might suit your needs.
For retirement-based options and safer bets, try investing in a PPF or NPS, both of which are exempt upto Rs 1,50,000 under Section 80C, the same as ELSS. In fact, NPS offers an additional exemption of Rs 50,000 under Section 80CCE.
You must invest in a medical insurance other than the one provided by your company, if you do not already have one. With cost of medical procedures shooting high, you do not want to dig into your savings when an emergency strikes. You also get tax benefit under Section 80D for the same for a premium of Rs 25,000 for individuals and Rs 30,000 for those above 60 years of age. For senior citizens this limit will increase to Rs 50,000, 2019-20 onwards.
However, do look to save tax right through the year and do not delay the task until the end of the financial year. Hasty purchases in the last minute could lead to potentially selecting an unsuitable product. You might not even have the sufficient corpus at that stage to maximize the amount you are eligible to save or invest.
Asset Allocation
A new financial year is also a good time to review your asset allocation strategy. Among equity and debt, you can either choose to re-balance your corpus to match your pre-defined allocation, or refresh the said allocation to reflect a change in your risk appetite or investment horizon.
In essence, healthy financial planning is as much about learning from your experiences as it is about putting together your money. With some sharp foresight and perseverance, you can look to use the coming financial year to seamlessly move a step closer to your long-term financial goals, however steep they may seem at this point.
BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for Credit Card, Personal Loan, Home Loan, Car Loan, and insurance.