Financial year 2016-17 is well and truly in. Among the many things you look forward to is to improve your financial health. The annual salary increments would be round the corner. But along with that, there would be several expenses lined up, including home loan EMIs, insurance premium payments and education expenses for children, among others. So, how should you plan your finances for the year ahead. What are the many steps that you should take to ensure that you have enough for all expenses and some savings after that to invest? What finanical resolutions you need to take to keep your finacial health intact, if not better it.
FeMoney spoke to some leading financial advisors to ascertain their views on how to plan your financial calendar. We start the series with views of Sanjeev Govila, CEO, Hum Fauji Initiative, a leading financial planning entity.
Govila says besides planning for financial health, one should assess the whole year’s expenses and the various money taps through which they can be met. Your earnings estimates would give you an idea of the tax liabilities and you can lay the foundation of your financial plan around it. Make your tax-saving investments at the beginning of the year, instead of waiting till next March, says Govila.
He advises putting savings and investments through the automatic route through ECS and higher provident fund outgo from the salary itself. Also, if you have not made your Will, that should take priority in your financial planning calendar. Plough back some money into social causes, if you can. That would make you a happier person!
Govila’s 6 resolutions for a better financial year is as follows:
-Take a firm hold of what are you expecting to earn during the year: This will make it clear as to what your tax liabilities will be. For a change, instead of investing in March for tax saving for the dying financial year, do it in April for the new FY. It will be more comfortably done and in a better manner. Probably last minute bank 5-year Fixed Deposits or National Savings Certificate (NSC) will get replaced by a systematic investment plan (SIP) in equity linked savings schemes (ELSS) in your scheme of things, where money is invested every month and results in a E-E-E (exempt, exempt, exempt) taxation with better returns.
-Taxation drudgery done, look at your savings equation: Try to make it ‘Income – Savings = Expenses’ instead of ‘Income – Expenses = Savings’. It’ll result in a fuller life and minimise those ‘lifestyle’ expenses which actually only result in wasteful and avoidable expenses. And such a lifestyle change can only be done at the beginning of the year rather than when there’s no time left to act.
-Assess expenses for the year, at what time they come up and how you’ll meet them: Don’t forget the big-ticket expenses like the life and car insurance premiums. Any maturities of FDs, insurance and other investments be also considered. Workout on a simple excel sheet would do the trick on a lazy Sunday in April.
-As far as possible, make your savings automatic without needing your intervention. SIPs going from bank account, healthy Employees Provident Fund (EPF) outgo from the salary itself, ECS for insurance premiums etc are the planned tricks which go a long way in converting your money to wealth without hassles.
– Remember two important aspects – Will and charity: If you haven’t yet made a Will, get after it. Make it now yourself or seek professional help. Don’t ignore it. Similarly, when you earn well, give back something to the society which has given so much to you in plenty. Choose a cause close to your heart, make your contributions online and automated.
– Lastly, life is about living it: Don’t forget to live a good lifestyle, but always remember overdoing it beyond a limit not only is an active wealth destroyer but also shows sooner than later around your girth!