Regular health check-up is very important as it will elaborate health issues at an initial stage. In the similar manner your wealth check-up at least once a year is of utmost importance as it will throw light on issues in your financial stability and check the parameters of a healthy financial life.
As stated in the last section of why one needs to avoid the march rush of making investments to save taxes, I would urge everyone to think of your tax liability and means to save maximum taxes with available means right from April 2023.
Investment in tax saving options is just a tip of the ice berg in one’s Financial Planning.
Proper Financial Planning with the help of an expert will help one to sail through any financial adversities and even medical emergencies. I would elaborate on a few steps in simple words, easy to understand on how to plan ones Finances.
Set your priorities
The first step to save money is to figure out how much you spend. Keep track of all your expenses, big or small. This exercise can be done for three to four months a year. The objective of this exercise is to cut down on all non-essential expenses and extravagant life style expenses. Simple living is the key to happy sustainable life.
Determine goals
There is a thin line between goals and wishes. You need to be careful in the process of determining goals. Ask yourself three questions: When do I require the money? How much do I require? And, for what purpose?
Once you have answers to these three questions it becomes easier to plan. I have seen people making long list of goals. Nothing wrong in that. But, from this list one has to prioritise goals and work towards fulfilling them. When tax saving investments are done, check if these investments can be done in such a way that some of your goals can be achieved.
Budget for savings is a must
Once you have an idea of how much you spend in a month, you can make a workable budget. Your budget should outline how your expenses measure up to your income, so that you can span your spending and avoid overspending. You also need to make provisions for unforeseen expenses and create an emergency fund, which generally has to be six months of your monthly expenses. This amount can be saved in a bank fixed deposit.
Life and health insurance adequacy has to be checked with the help of an expert.
Trust worthy financial advisor
If you invest wisely, your investments will generate money. You need to have an advisor who is an expert in that particular area and who will be with you in your ups and downs for decades. Someone who focusses on you and your life more than his targets and goals. Avoid advises of bank relationship managers whose loyalty towards their banks is more and less towards your financial priorities. They generally are not with you after three-four years. While your personal financial advisor will be with you for a long time.
I have found majority of investors saving without any planning or setting goals. Saving is good but not attaching a goal to investing is bad. It is like boarding a train without knowing your destination.
(Bhushan Limaye is a Chartered Accountant)
