As the new financial year has already begun, it’s a good time to take stock of your finances and financial portfolio, reassess and review them, and set the course for the rest of the year towards your long-term goals.
It’s that time of year again when you spring-clean your homes and revisit your financial portfolio, sorting out your finances for the new financial year. You may have insurance policies you no longer need or high-interest loans that you should pay off at the earliest. By assessing your assets and liabilities, you will be better positioned to spruce up your finances, especially at the start of the new financial year.
According to experts, it’s important to re-assess one’s financial goals and timelines: Are all the goals still valid? Are the time horizons the same or have they shifted? Are there any new additions to the goals? Based on the above, you need to look at asset allocation and rebalance your portfolio.
To start with, consider any tactical rebalancing that you may have to resort to. Ask yourself a few basic questions. Have your earnings and savings patterns changed? Also, reassess your emergency and retirement funds.
Says Priti Rathi Gupta, founder of LXME, a financial platform for women: “Plan your taxes at the beginning of the year as it will help you minimise your tax liabilities, leading to more savings, which could further get allocated towards achieving your financial goals. Set a time every month in your calendar to review the same. Discuss money matters and your financial planning with your family, along with your financial document checklist.”
You could start with tax planning for the new financial year by utilising Section 80C, Section 80D, and Sec 80G benefits. If you have an education loan and a home loan that would further benefit your tax planning if you use the old tax regime. Do a risk profiling to re-confirm the asset allocation with your financial advisor.
As a practice, invest your tax refund. Use the money from your refund to replenish your emergency fund. You could also use this money to manage your debt by paying high-interest debts, such as credit card, mortgage, car loan) and so on.
Says Dilshad Billimoria, a Securities and Exchange Board of India-registered investment advisor (Sebi RIA) and managing director and principal officer, Dilzer Consultants, a financial planning firm: “For those who have received a bonus at the start of the new financial year, they can plan well to either pay off a loan or reduce debt to optimum levels, or, start a systematic investment plan (SIP) to bridge the gap in meeting their goals. They could also utilise the funds for an important upcoming goal, or increase their SIP allocation to help meet unmet goals based on priority,”
Lastly, set up a budget according to your goals. Determine what’s urgent, important, and can wait later. Also plan your annual budget while considering inflation. Use budgeting apps or online tools to organize and stay on track. Think about ways to reduce your expenses.
Billimoria also advises setting up an investment account. This can be done by transferring one’s income into this account before spending, once all committed savings are taken care of. “Also review your health and life insurance policies to make sure they match the calculated target amounts determined by a needs-based analysis,” adds Billimoria.
As a new financial year presents a great opportunity to reassess your spending, so, review your outflows and consider making adjustments, such as ordering less carryout or cancelling unwanted subscriptions.
“Make your tax/ equity linked savings schemes (ELSS) contributions. Advance tax helps in allocation of investments in a prudent manner, looking at avenues which give better returns. Streamline your holdings. Asset allocation options can provide a diversified portfolio in a single investment and are rebalanced regularly. Automate investing. Set up a recurring contribution amount to a tax-advantaged or taxable investment account,” says Tanvi Kanchan, head - UAE business & strategy, Anand Rathi Shares and Stock Brokers.
“Also, evaluate your insurance coverage. Review your coverage levels, including life, health, disability, liability, auto, and property. Research and pursue any discounts you might qualify for. Prepare for your retirement. Aim to save at least 10 -15 per cent of your salary (including any employer plan contributions) across your retirement accounts,” adds Kanchan.