Financial Planning: What should be your investment strategy in the new financial year, know here – get all information about financial planning here
[ad_1]
budget for the whole year
Budgeting is very important in financial planning. Only when you have a clear idea of your income and expenses, you can plan your finances for the future. For this step, you should prepare a list of expenses that you are likely to incur during the coming year. Separate them according to your needs. Maintain essential expenses, and avoid spending expenses that do not bring you any value in your life. When budgeting, don’t forget to account for your investments. This exercise will give you a good idea about the amount of money that you would need to live a good life and fulfill your life goals.
list your goals
The new financial year is a good opportunity to review the goals set earlier and re-align them based on your income and career progress. Re-think your goals, and filter them according to your current and future needs. Note down the goals you want to achieve this year and set a reasonable deadline for them. For example, setting up an emergency fund or saving for an upskilling course are short term goals that can be achieved in 2 years. Saving for children’s education or marriage are examples of medium term goals that may take 5-7 years to achieve. Buying a home or planning for your retirement are long-term goals that typically span 20 years or more. When you decide on your goals, only then can you start planning your investments, which will help you achieve them.
Create investment strategy
The next step is to identify the instruments that will help in achieving the various goals. While doing so, make sure to include tax-saving instruments in the portfolio. Make sure your portfolio is diversified. So, that you can keep the risk to a minimum and get maximum returns from your investment. To save tax, you can consider options like Public Provident Fund (PPF), Tax-saver Bank FD, Voluntary PF (VPF), ELSS etc. At the outset of your investment journey, make sure that you review your investments regularly and increase them as your income grows.
invest regularly
A systematic and disciplined approach to investing can give you the best results in the long run. The mantra is simple. Invest regularly and consistently. Do not stop investing or withdraw in case of market volatility, especially SIP should be continued. The effort should be to increase the investment if the income increases. For example, if you have invested Rs 1000/- every month through SIP in the year 2022, then in 2023, as your income increases, increase it by 10% or Increase more.
Build an emergency fund
Uncertainties, big or small, are a part of life. It is important to be prepared for them. If you haven’t already built an emergency fund, start building one. Ideally, this capital should be equal to 9 times your monthly income. To access this money quickly, you can consider savings accounts or fixed deposits that can be easily liquidated.
Be disciplined in loan repayment
With frequent rate hikes, interest rates have already reached pre-pandemic levels. Due to this the debt burden of the borrowers has increased. With loan EMIs and tenure increasing, just paying EMIs is no longer enough. Consider paying 5% of your outstanding loan every year to save on EMIs and reduce your tenure. You can also consider refinancing to save on interest, as spread rates are currently trading at a new low of 1.95. Don’t neglect credit card bills, pay them in full on time. Making timely repayments will enhance your credit score and creditworthiness, making it easier for you to access credit in the future.
Get adequate insurance cover
Another aspect of efficient financial planning is getting adequately insured. Life and health insurance are two essential products that increase your preparedness for a financial emergency. Life insurance helps you replace your income. This way your loved ones are in a financially sound position in case of sudden demise. On the other hand, health insurance helps in covering the medical bills. These expenses can easily affect your savings at present. Your life cover should ideally be 10-15 times your average annual income. Health insurance coverage should be decided on the basis of your family’s medical history, age and lifestyle and habits. In the case of both these policies, you should review them regularly and adjust their coverage based on your income and your family’s needs.
[ad_2]
Source link
