The last fifteen sixteen months have been very eventful for India as a new Government came in power with a clear majority which prompted the stock market to take a new high. The two budgets presented by the new Government are all about hope for the common man with thrust on social security and higher domestic savings. Even though we had high inflation, the economy looks better under the new leadership. All around there is hope, talk about growth and India becoming an economic super power. Thanks to the demographic, we as a country emerged as the youngest and certainly moving into a high growth trajectory. There are few financial matters that, if managed wisely, can further multiply your benefits and lead you to a happy and relaxed life—even though all of these may take some time to reflect in tangible benefits for the nation as a whole and the common man in particular. Manage your money effectively.
Our lives are constantly hounded by choices. Higher aspirations result in a wider range of financial choices when there are more options. These lead to owing more than one credit card, EMIs, home and personal loans which require constant supervision. It is essential that you keep track of these details. The deadlines for various payments must be kept under constant vigilance. In addition to the outstanding balance, you will have to pay a high interest rate and delinquency fees if you lose track. For instance, the interest rate on a late credit card payment could be anywhere from 24 percent to 36 percent. However, with a little caution, these costs can be easily avoided. If you are investing as well as paying these costs, it is crucial that your bank account has a sufficient balance so that auto-debits, EMIs, and other payments can be made on time. You will get better returns on your investments if you make payments on time. For example, if you are investing in PPF and you make the monthly investment before the 5th of the month you earn interest for that month and no interest if invested after 5th. You will get the most out of your investments if you pay attention to these minute details. A timely auto debit of your SIP ECS ensures you do not pay bank charges on rejection of the auto debit
Review and rebalance your investments
We start our career with certain goals in mind. Therefore, it is necessary that we review these goals regularly and check the progress. As an investor are you satisfied? Please analyze the performance of your investments. An investment, if fails to perform as estimated then the goal might remain underfunded. The total corpus required for the fulfillment of the goal may have increased due to unavoidable factors like inflation. To avoid such a situation an investor needs to decide if any further investments need to be made.
Reviewing and rebalancing the portfolio is the key to achieving your financial goals. In FY 2014-15 fixed income return was around 9%, gold fell by more than 5% and equity delivered around 35-40% return. The portfolio must be rebalanced in light of these market shifts. Check how the investments for various goals have progressed and if they met the returns that were expected. Investors along with their financial planners must set goals that the investments should achieve in the years to come.
Spend but within a budget
Prioritize your sending and do not be extravagant. Keep track of where you are spending on a regular basis to ensure that your money is being spent for the right reasons. You are aware of your financial capabilities; having a budget may assist you in setting boundaries. As a safety net in the event of a financial crisis, establishing a contingency fund is critical. Being on a budget does not imply you will have to be hard on yourself. This means that you have to make financial decisions based on how important they are and what they are used for. Focus on your Tax Planning
Planning your taxes is not something you can do hurriedly in the last month of the fiscal year. It should be conducted in a manner that it gives you the double benefit of earning returns and saving taxes. Under Section 80CCD(1B), investments of 50,000 under the National Pension Scheme (NPS), which was launched by the Indian government, are now eligible for tax exemption. Starting early could also lead to an early retirement. You don’t even have to work until you’re 60 if the returns on your investments are good enough to support you. The Demonic Debts
Global economic crisis have often been caused due to heavy reliance on debts. This remains unchanged for personal finance as well. Having too much debt burden, like Home Loan EMIs, Credit Card installments and any kind of kind for self indulgence can be deadly. Debt and plastic money is easily available these days, For example – these days you can buy a pair of jeans or buy a new hand set or a tablet on EMI. Do not make these kind of affordability a way of life. It will create a bubble of debts where new debts are created to repay the old debts. Remember, these debts are costly and if not paid off in time can create serious problem for you. Even if you can financially afford the monthly payments, you must avoid these debts. The best thing a person can have is a debt-free lifestyle and an increased return on their monthly surpluses. Enough money saved for retirement It is never too early to start planning for your retirement. Don’t let your early years stop you from making retirement plans. If you could invest in The National Pension Scheme (NPS) and receive a tax deduction of 50,000 under Section 80CCD(1B), this would be advantageous. You will retire one day and you will need the same income to maintain your current lifestyle. Starting early could also lead to an early retirement. If your investments grow enough to ensure a handsome income you do not even have to work till 60, unless you want to.
The silly mistakes should not be the expensive Ones
Most people tend to borrow from their future income like yearly bonus or festival advance or their provident fund balance. They resort to credit cards to borrow or withdraw money against these foreseeable incomes. It is advisable to first pay the outstanding debts, if you have any, from these amounts and save the interest. To earn more than your savings account, it is best to invest the surplus in a new investment or simply in a liquid fund. How well are you covered
There are broadly three kinds of coverage: Life insurance, health insurance and property & casualty insurance. The life insurance cover an individual requires keeps on changing. The cover that was sufficient ten years ago is not sufficient to cover a life today. Depending on the circumstances surrounding you and your income levels, the cover needs to be increased or decreased. It’s a good idea to get more life insurance if you’re going from working for someone else to being your own boss. The insurance that was most likely provided by your employer will no longer be valid. Insurance for health care is the same. As an investor you need to ensure that you have a policy that covers you and your family from any major health calamity that might befall you.
Other than automobile insurance, which is mandatory, property & casualty insurance is one of the most underestimated insurance in India. Property and casualty insurance covers the insured against the losses to their property (home, automobile and business) and against legal liability arising out of causing injury or damage to someone else or their property. Insured can also get protection from natural calamities like earthquakes, tsunamis, cyclones, volcanoes etc. The importance of property and casualty insurance has been glaringly important because of the recent natural calamity that hit Nepal and parts of Eastern India. Insurance against theft, fire and any other natural calamity may seem farfetched but one understands its importance only when it occurs. The premium paid every month is minimal for these insurance but you get what you need most: security.
