Managing Personal Finances In FY23

Managing Personal Finances In FY23

Managing Personal Finances In FY23 Now that the pandemic is on its way out and the economic scenario is limping back to normal, it is time to take stock of your own financial status and tick off the right things while making amends for things that have gone wrong. The article provides some valuable tips in this direction

And now, two years after the pandemic, we are wondering where the time went and how we managed it all! With all of the ups and downs that many of us have seen or experienced in life, the new fiscal year awaits to be filled by financial resolutions for you to follow or adhere to. This time of the year is ideal for reviewing and revising your finances, as well as planning for the coming year. In the year gone by, there was a rising tendency among investors to participate in the stock market rather than traditional choices such as bank fixed deposits (FDs) and government schemes because they offered superior returns. Here is a look at the rate of returns of various investment products available.

As can be seen from the table, one can make an informed decision as to where there is opportunity to create wealth over the long term. Following are some of the things that you should consider for the fiscal 2023:

Finance and Budget Review
You must have recently filed your taxes. As a result, you are aware of your activities throughout last year. Examine your significant expenditures and investments and consider how you could have prevented excessive spending. Remember to value the money you earn with your own blood and sweat. A well-planned budget is essential for attaining your financial objectives. Establish a long-term financial strategy by reviewing your present obligations, savings and investments.

Examine your spending over the last few months. Also, develop precise income estimates for the future. Make it a habit to follow the 50-30-20 rule when it comes to money. This indicates that 50 per cent of your earnings will go towards necessities or needs, 30 per cent to wants or discretionary spending and 20 per cent to financial goals or savings. Keep in mind that this will be extremely tough to handle at the start of your career, or in a new job or area of residence, but you will ultimately have to discipline yourself to stick to it, because it is a good long-term habit

Tax Planning
Many a times, we put off conducting our tax-saving exercise until the last minute. We make hurried judgments at the eleventh hour, investing in inefficient products such as Unit Linked Insurance Plans (ULIP), other traditional life insurance plans, tax-saving FDs, and so on, resulting in disappointing results. Therefore, it is essential to schedule an appointment with your financial adviser or a chartered accountant to organise your money and devise a methodical plan for making additional preparations and lowering your tax liability. Get to know about the new tax system established by the IT Department and understand the details.

Review Financial Goals
Examine your financial goals, both short-term and long-term, that you set for yourself last year. Tick the ones you have completed or are about to complete. Record your progress in percentage terms so you can see how far you have gone and how far you still have to go. You may also keep an Excel spreadsheet for your financial goals to track your progress and accomplishments. Nowadays you can also get a free tool online. You may also prepare for a few expected and new goals such as family expansion, house renovation, vacation, education, new car, and so on, which you can add to your list of goals and track appropriately.

Maintain Emergency Fund
Planning for emergencies can frequently assist in overcoming a cash pinch during a period of income loss. Many individuals lost their employment as a result of the pandemic-induced lockdowns, which is where this emergency fund comes in. There is a legitimate purpose to establish an emergency fund in the first place. This is due to the fact that when you lose your job, you need to incur a number of necessary costs, including your EMIs. Having an emergency fund in place allows you to protect the assets you have made for your financial requirements, such as your child’s education, retirement, and so on. Not only that, but it also helps to ensure that your systematic investment plan (SIP) commitments to those goals are maintained. So, this new fiscal, set aside money for an emergency fund. If you already have one, make sure to review it. 

Invest in Yourself
If this lockdown has taught us anything, it is how to use our time wisely and productively from the comfort of our own home. You may have observed a large number of CEOs, job-seekers and college students signing up for various courses to develop their abilities in their specialist field in order to advance their careers and therefore expand their portfolio. There are several resources, both free and paid, that may assist you in taking those online courses. Thus, if you want to attain your job objectives, you need create some place in your budget to pay for those

Manage the Credit Card Credit cards were designed to be a boon, but they often turn out to be a curse for the user when their use becomes excessive and aimless. Credit cards should always be regarded as a last resort emergency fund. Relying too heavily on your credit card for little purchases such as groceries, daily necessities and food makes you appear ‘credit hungry’, which can harm your credit score. In order make credit card dues payable, one should retain no more than two credit cards and restrict utilisation to 30 per cent of the authorised limit.

Make it a practise to pay off your credit card debts on a monthly basis as soon as your salary is received. Credit card usage must be kept under control in order for this to happen on a regular and burden-free basis or else the vicious cycle of credit card and its dues will continue to rise, damaging your spending and savings in due course. It is important to monitor your credit score and study the complete credit report that details the elements impacting your credit score these days. It assists you in analysing what is going your way and keeping track of your expenses and liabilities, if any. One must endeavour to make payments on time and follow up with credit bureaus on any discrepancies on one’s credit record.

Reassess Insurances
If you don’t have insurance or rely on your employer’s coverage, it’s time to get yourself some. As a safety net, the pandemic has emphasised the need of obtaining health and life insurance. If you have insurance, go through it again. Check to see the various policies offer the best protection or if you can get something better for a lesser price. Make wise insurance choices to protect your financial and family’s future. In addition, having a term insurance policy in place with an amount assured that can fulfil your long-term financial goals in the event of an unexpected incident is useful.

Clear the Debts
You may not be able to totally eradicate your debt, but you may try to reduce it as much as you can. Determine how you can comfortably clear any outstanding credit card bills, EMIs and other loans. Avoid incurring any additional debt that isn’t absolutely required in the coming fiscal. Spend no more than you can afford to repay. Consider consolidating debt from many sources into a single loan, resulting in a single lower interest rate.

Review Retirement Savings
Many of us think of retirement planning as something to do later in life, but after the last two years’ experience it has become critical to plan for the future. Every passing year, growing inflation has an effect on the value of money. As a result, instead of sticking to traditional investment options like fixed deposits and life insurance policies, one should look into other investment products that provide inflation protection while also providing a good payout after retirement, such as pension accounts, systematic withdrawal plan (SWP) in mutual funds, and so on.

 

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