Financial Resolutions for the New Financial Year
Financial year 2018-19 is just about to end. However, with the financial year 2019-20 knocking the doors, it is the right time to make new financial resolutions for a secure financial future ahead. Here are five financial resolutions you must take in the new financial year:
Creating an Emergency Corpus
While we all wish for the good times, one must also be prepared for any future contingencies. It is generally advised that one must keep an emergency corpus of at least 6 months’ expenses, to take care of any unforeseen events like job loss, market downturn, any sudden medical expense etc. Having an emergency corpus helps an individual to face the challenges of life with much more strength. As such, if you have not yet created an emergency corpus for yourself, this is indeed the right time to start building one. Further, the investors must invest such emergency corpus in overnight funds and liquid funds, which may provide better returns to the investor without any significant impact on liquidity as compared to the traditional bank savings account.
Making a Budget
Warren Buffet once said, ”You should not invest what is left after spending but instead spend what is left after investing.” This highlights the importance of prioritising savings over spends. Making a budget for your monthly expenses and then following it religiously can help you eliminate undesirable spends. Another important strategy is to include the monthly investments as a part of your monthly budgets. This will help you plan for your investments automatically from your monthly income.
Spreading the Tax Saving Investments across the Year
It is a general tendency amongst the taxpayers to defer their tax-saving investments to the last quarter of the financial year. This is also supported by the data of the inflows into ELSS (Equity Linked Savings Scheme) funds during the last 3 years, which highlights that around 38% of the total inflows into ELSS are received only during January, February and March months. Such deference not only exerts pressure on the cash flows during the last quarter, but also due to a time restraint, the taxpayer may not be able to explore all the available options. As such, make sure that you resolve to spread your tax saving investments across the year and invest accordingly, so that you are able to make the most of the tax eligible deductions of Rs. 1.50 lakhs under Section 80C.
Making Systematic Investments
You must also resolve to make investments for your financial goals on systematic basis. Systematic Investment Plans (SIPs) offered by mutual funds allow you to make regular investments in the mutual fund scheme of your choice on periodical basis. Just like small drops of water make an ocean, making investments consistently over a long period helps you to accumulate a healthy sum over a period of time. This financial year, you must take a step ahead towards making such investments systematically. If you have not yet started a SIP yet, register one now, and if you have already made the beginning, consider making a SIP top up to add more fuel to your financial dreams.
Reviewing Investment Portfolio on Regular Basis
While it is important to make investments for a healthy and secure financial future, it is equally important to perform a financial review of your investments on a regular basis. This helps you identify the underperforming mutual fund schemes, which you can consider replacing with better performing schemes. Such a periodical review will also ensure that your financial planning stays in sync with your financial goals and you stay on track to achieve your financial goals within the desired time frame.
While the above five financial resolutions may seem easy to be made, it is important to stay committed towards such financial resolutions as well.