You must set the ball rolling now if you want to make the best possible money decisions this year.
April being the start of the financial year has great significance when it comes to managing your personal finance. It’s that time of the year to give special attention to accomplishing specific financial tasks and set the new year’s financial strategy in place.
It is also the first month to initiate your tax saving process and to re-assess your portfolio to suit your tax-saving and investment objectives. It’s also a good time to plan for any short-term saving goals, be it for a holiday, children’s education, or any other expense expected to be incurred during the course of the year.
Let’s see in detail why April is so critical to your personal finance.
Start Tax Saving
People who wait for the last few days of the financial year to execute their tax saving plan, often make mistakes and fall short of the required exemption amount. The best way to maximise your tax exemptions is to start the tax saving drive from the very beginning of the financial year.
In the first month of the financial year itself, you can make an estimate of your tax saving investment requirement for the year and accordingly start investing money either through monthly instalments or one-time payments. Don’t forget to re-evaluate alternate options for tax-saving investments which are due to mature this year.
Preparing a yearly budget based on your income and spending pattern, investment plan and expected tax liability help keep things in check. You may consult your financial planner to review and re-plan your budget for the year. While preparing the yearly budget, you should give special attention to changes in your insurance cover requirement, contingency fund requirement and allocate sufficient fund for covering various financial risks.
Assess Expenses for School, Colleges or New Admissions
For those who have kids, schools and colleges start their new sessions from April. Education fees are hiked every year which you must keep track of. You may need to pay a hefty admission fee along with the regular school fee in the first month of the financial year itself. So, you must re-plan your expenses accordingly and be ready with sufficient fund to pay for increased education fees.
New Income Tax Rules
The new income tax rule applies from the beginning of the new financial year, i.e. from 1st April every year. You must stay updated with the changes announced in the income tax rule and accordingly make adjustments in your expected tax obligation. For instance, an LTCG tax of 10% on all equity investments will be levied on gains above Rs. 1 lakh from this year, so make sure you factor in the tax liability before further investing. Moreover, standard deduction will now be applicable on income tax computation, so medical bills may are no longer necessary.
At the same time start collecting each required document for filing ITR which you may not have from now itself, to avoid last minute hassles.
Planning Allocation of Increased Salary
Companies normally increase the salary w.e.f April month, i.e. beginning of the new financial year. So, if you too get an increment in salary, then April is the right month to use this extra income for starting a new investment or to repay your existing debt and rest can be used for spending on buying things that you have long waited for.
Strengthen Financial Discipline
Though financial discipline shouldn’t be restricted to a particular month, April can be the start of a new year to strengthen it. Following discipline by avoiding unnecessary loan and timely repayments of EMIs on existing loans, are habits you should continue or adopt if you haven’t yet. Make sure to draw out your insurance and Mutual Fund SIP instalments calendar to keep such sums aside.
How smartly you manage the starting of the financial year, decides your financial efficiency in the later part of the year. It’s the month to learn from your past money mistakes and plan for a better financial future.