A new financial year has started on April 1. This is a good time to get your personal finance
decisions straight. To plan and act this time of the year makes sense for two reasons:
after the last minute tax-related investments in the just-ended financial year, your money
matters will remain fresh in your mind.
starting early in the year allows you to plan more methodically for not just your taxes, but
also for your short- and long-term goals.Here are five aspects you should consider planning and executing right away
1.Planning tax-saving investments
Last minute exercises in tax planning hurts you in several ways. You may not have enough time to calmly consider the various options and what suits you best.
You end up earning sub-optimal interest on a few of the fixed-income options.
If you are investing in equity-linked options for tax saving,you may end up investing at the wrong time. You may be forced to make a one-time lump-sum investment.
As you can use Systematic Investment Plan (SIP) if you start at the beginning of the year, it helps you average costs and avoid making a lump-sum investment at the wrong time. You could do an SIP even with limited surplus every month.
2.Insurance
Yes, this is, ostensibly, a tax-planning exercise for most of you. But more is at stake. This is why you need to plan for your insurance when you are not in a hurry.
Often times, you end up buying one policy after the other,every single year, not knowing what you need, whether you are already well covered, and more importantly,whether your medical expenses require coverage.The must-haves are a cover on your life via a term policy and cover for your medical expenses. The thumb rule is to have a term cover that is equivalent to at least eight times your annual income.The desired cover will also depend on your liabilities such as home loans and educational loans and any other specific goals for your family for which you might want to keep this cover higher.
Similarly, even if you get a medical cover through your employer, it makes sense for you to supplement it with a cover for yourself and your family. This will ensure that you are protected when you switch jobs, and are also able to supplement what your employer provides, given the mounting costs of hospitalisation.If there is no medical cover as part of your terms of employment, make sure you have a sizeable medical insurance.
3.Get your cash flows right
Beginning of a year is also appraisal time for many of you.That may mean suddenly staring at a lump-sum incentive or seeing a hike in your pay.
If you have any unsecured loans or credit card loans that yield you no tax benefits, get rid of them; repay using the surplus. You cannot have some surplus earning you 4 per cent in your savings account while you shell out anywhere between 13-36 per cent interest on such loans!
Else, create a contingency fund by investing in a liquid fund. That way you will keep your money away from your ATM card, earn much higher than your savings account, and, of course, take the money out in an emergency.
And if it is a pay hike you have received, then more reason you should hurry up and put the increase to good use.The best way would be for you to start an SIP in a mutual fund. If you have short-term or long-term goals, mark the investment towards a goal and choose the funds accordingly. This time of the year, when you see the school admissions on or see students starting to apply for higher education, you get a feel of what is the kind of sum you need to save up for your children.
4.Review your allocation and investments
The start of the financial year is a good time for you to rejig your asset allocation, if needed, and bring them back to your intended allocation. For instance, in years when your equity holding has gone way above your original allocation, you could well book profits and shift it to other asset classes such as debt funds or gold.
Also weed out laggards, especially in your mutual fund or stock portfolio and shuffle the money to other funds (or stocks) or asset classes as the case may be
5.Reinvest right away
It is also the time of the year when investments such as Fixed Maturity Plans (FMP), mostly invested by you for double indexation benefit, mature and swell your bank balance. Not investing them right away, especially at a time when interest rates have peaked, would mean that you settle for lower returns later.
Consider rolling the money into a fresh FMP or go with debt funds with a 1-2 year time frame at least. If you are looking for some income and are in the lower tax bracket, then options such as quality corporate fixed deposits or post office senior citizens’ scheme are good to lock into now, given the decent interest rates
decisions straight. To plan and act this time of the year makes sense for two reasons:
after the last minute tax-related investments in the just-ended financial year, your money
matters will remain fresh in your mind.
starting early in the year allows you to plan more methodically for not just your taxes, but
also for your short- and long-term goals.Here are five aspects you should consider planning and executing right away
1.Planning tax-saving investments
Last minute exercises in tax planning hurts you in several ways. You may not have enough time to calmly consider the various options and what suits you best.
You end up earning sub-optimal interest on a few of the fixed-income options.
If you are investing in equity-linked options for tax saving,you may end up investing at the wrong time. You may be forced to make a one-time lump-sum investment.
As you can use Systematic Investment Plan (SIP) if you start at the beginning of the year, it helps you average costs and avoid making a lump-sum investment at the wrong time. You could do an SIP even with limited surplus every month.
2.Insurance
Yes, this is, ostensibly, a tax-planning exercise for most of you. But more is at stake. This is why you need to plan for your insurance when you are not in a hurry.
Often times, you end up buying one policy after the other,every single year, not knowing what you need, whether you are already well covered, and more importantly,whether your medical expenses require coverage.The must-haves are a cover on your life via a term policy and cover for your medical expenses. The thumb rule is to have a term cover that is equivalent to at least eight times your annual income.The desired cover will also depend on your liabilities such as home loans and educational loans and any other specific goals for your family for which you might want to keep this cover higher.
Similarly, even if you get a medical cover through your employer, it makes sense for you to supplement it with a cover for yourself and your family. This will ensure that you are protected when you switch jobs, and are also able to supplement what your employer provides, given the mounting costs of hospitalisation.If there is no medical cover as part of your terms of employment, make sure you have a sizeable medical insurance.
3.Get your cash flows right
Beginning of a year is also appraisal time for many of you.That may mean suddenly staring at a lump-sum incentive or seeing a hike in your pay.
If you have any unsecured loans or credit card loans that yield you no tax benefits, get rid of them; repay using the surplus. You cannot have some surplus earning you 4 per cent in your savings account while you shell out anywhere between 13-36 per cent interest on such loans!
Else, create a contingency fund by investing in a liquid fund. That way you will keep your money away from your ATM card, earn much higher than your savings account, and, of course, take the money out in an emergency.
And if it is a pay hike you have received, then more reason you should hurry up and put the increase to good use.The best way would be for you to start an SIP in a mutual fund. If you have short-term or long-term goals, mark the investment towards a goal and choose the funds accordingly. This time of the year, when you see the school admissions on or see students starting to apply for higher education, you get a feel of what is the kind of sum you need to save up for your children.
4.Review your allocation and investments
The start of the financial year is a good time for you to rejig your asset allocation, if needed, and bring them back to your intended allocation. For instance, in years when your equity holding has gone way above your original allocation, you could well book profits and shift it to other asset classes such as debt funds or gold.
Also weed out laggards, especially in your mutual fund or stock portfolio and shuffle the money to other funds (or stocks) or asset classes as the case may be
5.Reinvest right away
It is also the time of the year when investments such as Fixed Maturity Plans (FMP), mostly invested by you for double indexation benefit, mature and swell your bank balance. Not investing them right away, especially at a time when interest rates have peaked, would mean that you settle for lower returns later.
Consider rolling the money into a fresh FMP or go with debt funds with a 1-2 year time frame at least. If you are looking for some income and are in the lower tax bracket, then options such as quality corporate fixed deposits or post office senior citizens’ scheme are good to lock into now, given the decent interest rates