Five smartest things to do with the start of the new financial year

The last two years have been gruelling for people when it comes to managing finances. With layoffs, salary cuts, business shutdowns and medical expenses, every other person in the country has suffered financially due to the unprecedented circumstances that occurred due to the pandemic. However, the last two years have also made people realize the importance of financial planning. And there is no better time to do it than the beginning of the new financial year.

One may ask why this time of the year? Well, a new financial year means time to mull over the financial goals of the past year and chalk out a more concrete plan to ensure financial stability and security for uncertain times. For a stress-free year, the following are some of the things that you must do at the beginning of the new financial year:

Track your expenses

If you have never planned finances before, starting tracking expenses is an excellent first step towards a smart financial plan. Once you know where you are spending and how much, you will understand where you need to make cuts. For tracking expenses, you can go for expense management apps that will have a record of all your transactions. This way, you will be able to review your expense profile better and prioritize your spending accordingly.

However, if you are somebody who is already tracking their expenses, you know what to do. Sit down and review your expenses to better understand finances for the new year.

Reviewing goals

Next up is reviewing your financial goals. Every person allocates a certain amount of their income into savings, investments, etc., with a certain goal. As the new financial year begins, you may want to take a look at those goals again and maybe add new targets for the new year. For example, earlier, you were planning to buy a house after 10 years, but your increased income will enable you to achieve the same earlier. Hence, you can increase the monthly amount you were allocating for buying the house.

Reviewing investment portfolio

If you are not investing already, this is a good time to start investing and build a strong investment portfolio. But if you already have a portfolio, you might want to review it. A periodic review will help you understand how the funds where you invested have performed. If there are any laggards, removing them may seem like the best decision but you have to be careful. In such a scenario, you should only rethink the funds that have been underperforming for more than a year. But you also have to define underperformance.

Review insurances

People do not take insurance covers seriously, but they are a great help in times of emergency. Health insurance and life insurance are essential for every individual, especially if he/she is the breadwinner in the family. Thus, if your insurances are expiring, it is to renew them and if your family has expanded recently with the marriage or childbirth, it is important to revise the insurances as well.

Plan taxes

The most important part of financial planning is planning taxes. If you start tax planning at the beginning of the financial year, it means you have enough time to calculate investments and save the maximum amount of tax. You can spread these investments across the year.

By Mr. Jyoti Roy, DVP- Equity Strategist, Angel One Ltd