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Know how to organize your finances in the new financial year

The new financial year has started on 1st April. It's high time to review the performance of your existing investments. It is appropriate time to decide new investment, insurance, tax saving, NPS and loan servicing. Do it at the beginning of the year, instead of waiting for the last moment. Decide logically without any undue influence and reap optimum benefit.

The new financial year has arrived. It is now time to check the performance of your existing investments, review your financial plan, set financial goals for the year and plan tax-saving investments which should not be kept for the last moment. But how to proceed? Is it a very complex task? This article tries to find the answer.

Review the existing investment portfolio and re-balance different classes of investments

It is the time to review your existing portfolio. Check how do your stocks faring. Compare the performance of your equity mutual funds with the benchmark. How did the debt fund fare during last one year? Has the fold investment given a satisfactory return? Please check systematically the performance of all these asset classes. Thereafter think whether there is any material difference in your financial condition during last one year. Is it necessary to change/re-balance the current ratio? Think about all these issues. And then take a decision on re-balancing the existing investment mix. The beginning of the new year is a ideal time for this purpose.

Review your insurance needs and health insurance

Have you taken any loan during the last financial year? Is the loan insured? Has there been any change in the health condition of yours or any other family members? Check all these aspects. Taking into consideration all these factors, you must decide to get a term insurance. Keeping in view the health conditions of your family members, you will have to go for a suitable health insurance. The new financial year is the appropriate time to examine your insurance needs and act accordingly. Don't neglect this aspect. Remember that insurance is not a tool for investment, it is a protective umbrella for the entire family.

Suitably increase your SIPs in mutual funds

How much did your salary increase during last year? Have you already increased your SIPs in the mutual funds where you invest? If not, take a suitable decision to increase the SIP amount in these funds. Believe me, this simple step will immensely help you in wealth creation. It would help you to build a good retirement corpus.

Take a decision on tax-saving instruments

In the current year, you have to invest Rs. 1,50,000/- in Section 80C. Have you decided how to invest this amount to get the optimum benefit? How much do you invest in PPF? Are you going to invest in ELSS? You can't completely ignore the ULIPs also, because ULIPs now also come under the 'Exempt-Exempt-Exempt' category. Furthermore, you must decide on your investment in NPS also. It will help you to save additional tax and ensure pension after retirement. Think about all these factors now at the beginning of the financial year. This is the time when you can think rationally. At the fag end of the financial year, there is a possibility of taking a hasty decision based upon the advice of others. So, take an appropriate decision right now and invest throughout the year accordingly.

Loan servicing

Do you have an existing loan? How much EMI are you paying? Are you thinking to reduce the tenure? Then you can pre-pay part of the loan from the annual bonus which you are going to receive during this year. You have also to check the impact of prepayment of the loan on your tax liability/saving. Consider all the pros and cons of the loan servicing at the very beginning of the new year and act accordingly.

Final comments

Most of the people take hasty investment decisions relating to new investment, insurance and tax-saving at the fag end of the financial year. The hasty decisions won't benefit the investor and he/she don't get optimum benefit from these investments/insurances. Take financial decisions thinking all pros and cons at the beginning of the financial year, act accordingly and let your investment work for wealth creation on your behalf. Acting according to the advice given in the present article and in this article would definitely help a common investor in bringing financial discipline and wealth creation.

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Author: Umesh16 Apr 2018 Member Level: Diamond   Points : 3

Prudent financial investment is the basis of one's future affluence. Investment is an art. One has to invest in many avenues as one should not keep all the eggs in one basket.

The author has given a good guideline by telling that investments are to be reviewed on yearly basis. It is very true. Every year income tax rules are modified or changed so one has to adopt them and accordingly replan or redesign one's portfolio.

At the same time, it does not imply that one has to churn one's portfolio mindlessly in a fast pace to derive the gains. It may not work as many investments are supposed to be continued for the long term if a person wants to reap their real benefits.

There are some investments which are to be continued for a longer period to get the best out of them. Some examples are balanced mutual funds, Govt PPF scheme, ELSS mutual funds, shares of FMCG companies etc.

Author: K Mohan22 Apr 2018 Member Level: Platinum   Points : 3

I appreciate the author for giving best tips as to how to maintain the financial aspect in this new financial year. There is no wrong in thinking on that line, but the life is riskier these days and provision for sudden hospitalization have to be made. No doubt many are having health insurance and the hospital charges are taken care of, but for certain diseases, the Insurance companies are not giving full payment and thus the patient has to make provisions for that from his salary as savings. So the investment efficiency for each one of us varies as we give more priority to health and Insurance and then savings.

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