Month of April is always a good time to do an Annual Financial Check Up. US has been celebrating it as Financial Literacy Month and this is not without any reason. Being the start of new financial year, April has many changes on your table which not only relates to your career but also to your personal finance. If you are a salaried then you will be gearing up for an annual review which may bring monetary or non-monetary benefits to you, the budget 2015 provisions will get implemented from 1st April which may change your cash flows and most importantly, your children starts a new session bringing in more responsibilities along with increase in school expenses. All these and many other decisions of life will start impacting your finances as your income and expenses will change.
With so many events happening in new financial year, it’s difficult to avoid reviewing your finances. If not done you will end up taking those last minute decisions as and when the need arises. This may jeopardize your well- being as you may fall short of may targets. Considering all these complexities and the time you have in your hand since you will be taking a relief from that hefty year end, it’s a wiser approach to sit down and review your finances so that the Year 2015 does not bring you much surprises.
Here is what you should do to ensure the worry on your finances in the new financial year is removed :
1. Review Your Budget– Your expenses will grow with increase in education cost of your child and due to budget provisions, if any. How this will impact your savings is an awareness you should carry as you move forward. Review your budget which you would have been following. If not created, then start of financial year is the right month to create one. The budget should incorporate changes which would be having a impact on your savings in new financial year. This will help in taking measures to keep your commitments going and managing your finances within your means.
2. Review your Tax Planning– Every year the budget brings some change on the taxation front. Either the taxation slabs are tweaked or there is some new benefits introduced for the tax payers. So you have to review your tax liability every year to know what you can gain from it. This year too the infra bonds will come back and there is a small tax relief given to lower income group. Although tax planning is an event which goes throughout the year in different period, doing it at start of the year helps in spreading your investments. This reduces the chances of straining your finances in those last few months when to reduce your tax liability you do not have any recourse but to take last minute decisions. This has also been the reason for most investment mistakes which has lead to mismanagement of finances.
3. Evaluate Your Options-Due to lack of time most of us avoid doing a research on avenues we select for tax savings in last few months of financial year. With interest rates on small savings scheme being declared on on 1st April you have all the information during this month on what you will earn from most of the instruments. But all may not match your criteria and so you have to evaluate the options for which a detailed study may be required. Hence, it will be wiser approach to evaluate your options during this month so that you can avoid those last minute mistakes.
4. Create a Financial Planning Calender: One of the best way to plan your finances is creating action oriented months or quarters. You can assign each period for a specific task based on what is best so that you do not miss out on any aspect of decisions which impact your personal finance.
Here is an idea of what you can create quarterly –
April – Budgeting, Documentation and record keeping, Creating a Financial Plan, Planning for summer vacations, Updating your wills etc.
July – Reviewing your mortgages, Insurances, Check Non-Financial Inventory and match with appropriate insurance, Credit report, retirement plan, children goals etc.
October – Review Your Tax Plan, Plan to purchase vehicles, Household Items etc. as you get lot of offers and a good bargain during festive seasons, Review your Estate Plan, planning for winters vacation, Purchasing gifts due etc.
January – Check all documentation and paperwork to find if you missed any so that you can complete it.
March – A year end review of how you did, you can even plan to purchase winter clothes in some parts of country as you receive heavy discounts during this period.
One can plan according to the convenience and experience. You can even assign months for each of these task. By creating such a calendar you will be able to plan your personal finance and it helps you in creating a good discipline with your financial and non-financial decisions.
April is the month of annual check up. Your employers do it, companies do it and so the governments. Then targets are set for the year.The same applies to your personal finance. Sit down, review your finances and set targets for the year.
Are you going to review your finances? Will you bring your plan into action this month?
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