10 things to remember in the new financial year

Fiscal year 2017 has just hung up its boots, and financial year 2018 is upon us. It's time to review the year gone by. Fiscal-end is a great chance to review your past performance and make new financial resolutions for the financial year. It's the best way to achieve financial stability and sticking to your goals. 

Let us ask the following important questions and understand few tips and tricks before you plan your finances in this new financial year.

1 Get an Aadhaar Card; and if you already have one, link it to your Income Tax account

New government rules mandate an Aadhaar card to file income tax returns, and if you don't have one, or if it's not linked to your income tax account by July 1, 2017, you will not be eligible to file tax returns. The government has made the Aadhaar card mandatory for several schemes, and opening bank accounts, so it would be wise to get one. 

2 Restructure your existing home, car, or personal loans

After demonetization, several banks have cut the interest rates for home, car, and personal loans. This would be a good time to submit the required documents to restructure your loans to reduce your interest outgo on them. There is certain protocol to do this, so visit your bank or financial services provider now.  

3. Map your finances, and plan!

Planning your finances will lead to the ultimate freedom - "financial freedom". For instance, let’s say someone gives you Rs 100 crore, what do you propose to do with it? Will you continue at your job? Maybe not. The point is, once your basic and luxury needs are taken care of with the bounty, what are you doing to do to make sure you don't run out of money quickly? Once the 'why' of investing is clear, create a roadmap to plan your finances. No one is really going to just hand you Rs 100 crore, so you will have to make do with whatever you earn and invest it effectively so that you don't run out of funds. 

4. What are you investing for?

Having understood the “why of investing” and making it an integral part of your financial planing, the second important question you need to ask yourself is - what exactly you are planning and investing for? Is it for your retirement corpus or for your children’s education or to buy a house, car, and so on. This will help you set the right targets.

5. When and how to invest?

Once the goals are set, and you've quantified the amount you need to set aside to invest to achieve these targets, the next step is when and how to invest. The best time to start investing was the day you received your first salary. the next best? Today! You can read my earlier columns here to find out how to initiate investments in various asset classes to reach your financial goals. 

6. Do you have a contingency fund?

Have you ever created a corpus for a rainy day? There could be a medical emergency or you may lose your job. Make sure you take immediate steps to build cash reserves today. A contingency fund will let you have easy access in the case of an emergency. It will also ensure you don't disturb your financial goals by reaching into other investments like provident fund, fixed deposits, and mutual funds. 

7. Evaluate your financial performance of the previous financial year

It is a good practice to do a self appraisal to review your financial standing from time to time. Ask these important questions before you plan for the next year. 

> Have you paid your EMIs and other commitments like premium, fees, on time? Were there any late payments? 
> Did you achieve your financial objectives set out for the previous fiscal?
> Was there any unexpected expense and were you ready for that?
> How much returns have you made on your investments; did you exceed your target or fell short?
> Did you have any extra savings, if any, was it lying in a savings bank account or did you invest it smartly? 
> Have you taken a fresh loan, if yes, was it a planned expense or towards a sudden need to buy an item?

Once you cross-examine yourself, it will make you think about your financial goals and help you re-plan strategies for the next year.

8. Prepare a budget: monthly and annual

Based on your last year's financial performance and according to your financial planning, prepare a budget - monthly and annual. The objective is to plan income and expenses, and make sure everything goes according to plans. Once done, make sure you keep reviewing it on a regular basis.

9. Challenge yourself to increase your percentage investments this year and do systematic planning: 

Take an oath to increase your savings percentage this year and do a proper categorisation of your investment plans. Invest the right percentage, that is, allocation as follows:

> Investments for tax saving and tax optimisation
> Secure yourself and validate your existing policies i.e. life, health, and general insurance
> Increase your allocation in mutual funds and equity 
> Start systematic investment planning or increase the existing allocation
> Check your retirement and child education planning to make sure the investments are adequate inflation adjusted. 

10. Make charity a part of your financial planning

We owe our society but most of us don't know what to give where and when to start. To change this, make charity a part of your financial planning, it will then be taken care of easily. Make giving to charity a part of your financial planning goals this year.