Let us explode the wrong notions and misconceptions about finance and investments, thereby paving the way for our financial freedom and fulfilment. Among other things, there are five closely interlinked truths of life that are integral to defining, designing and, delivering financial and investment priorities.
Retirement
The biggest challenge about retirement is rooted in illusion. It seems far away till it knocks on your door one day, as if unexpected. One invariably feels its presence at the point of no return. To escape this vicious cycle, it is imperative that you plan for retirement from the age at which you can comprehend its meaning, which happens mostly in your 20s.
The early you start, the better you can plan for it. So, inculcating a saving habit, as also investing in different asset classes in line with one’s financial wherewithal helps one to make the most of the compounding effect which makes money grow exponentially over time. Time is money, they say, and they are absolutely right.
Life Expectancy
Assuming a student life threshold of 25 years, and a working life till age 60, the span of autumn years beyond 60 is substantial and must be planned for, given the fact that there is no income flow to support it. Given the advancements and innovations in modern medicine and tech-driven comforts that have made lives hassle-free, the average life expectancy is steadily growing across the globe. What does all this mean in financial terms? The fact that we will live longer means we will need to save enough and invest wisely to live life on our own terms, rather than dictated by circumstances.
Standard of Living
Standard of Living implies the manner in which live, how the game of money – of earning, spending, saving and investing – impacts our life. Does it improve our level of comfort, does it help maximise our wealth, and does it help us with value-added possessions above basic necessities.
Closely linked with standard of living is the concept of Quality of Life which implies an individual’s sense of wellbeing including physical and psychological health, financial freedom, and social status. If our income is unable to assure us Quality of Life, something is amiss from our financial and investment planning. Although standard of living and quality of life are subjective concepts, our financial decisions impact them to a great extent which is why financial literacy is extremely important.
Medical Expenses
It is a well-known fact that ailment is a function of age. Consequently, healthcare costs grow in tandem with advancing age, more so in cities and towns where stress has a huge impact on peoples’ health. Hence, it is most important to factor in medical costs in our financial plans and budgets.
In India, there is no concept of social security or universal health coverage, which means the Out of Pocket expenditure on health is invariably phenomenal, which exposes common people to the perils of derailed home budgets and debt traps, especially in the case of serious ailments like cancer and heart disease. Healthcare costs are inherently complex, and one can’t ever estimate the number and types of procedures and tests to be done in the course of treatment.
Further, wrong assumptions about medical insurance lead to last minute shocks in the form of higher-than-anticipated bills. It is, therefore, imperative to set aside a corpus for medical expenses, keeping it distinct from retirement savings and investments. As regards medical insurance, it is best to seek expert advice on choosing from among different heath policies.
So, what do these five facts of life tell us. They highlight the need to put investments in perspective. In the ultimate analysis, what are investments all about? They are all about maximizing returns and minimising risks, which are a function of prudence and patience. Once we put the need to save and invest in perspective, we capture the essence of key investing paradigms, tools, and techniques, thereby making the most of the investing avenues and instruments.
After we arrive at the investible funds after considering the five truths mentioned above, it is important to define our short-term and long-term goals, which in turn would help define our investment goals which may pervade different asset classes. ‘Never put all your eggs in one basket’ may sound like a cliché, but it helps us maximise wealth and minimise risks. No source guarantees consistent returns all the time but collectively helps us move up the value chain of investments.
In the last two decades, different asset classes like equity, debt and gold have outperformed each other at different times. A prudent selection of diversified investments will hence help us profit from the highs of each asset classes, and offset the shortfalls arising from the lows.
Retirement
The biggest challenge about retirement is rooted in illusion. It seems far away till it knocks on your door one day, as if unexpected. One invariably feels its presence at the point of no return. To escape this vicious cycle, it is imperative that you plan for retirement from the age at which you can comprehend its meaning, which happens mostly in your 20s.
The early you start, the better you can plan for it. So, inculcating a saving habit, as also investing in different asset classes in line with one’s financial wherewithal helps one to make the most of the compounding effect which makes money grow exponentially over time. Time is money, they say, and they are absolutely right.
Life Expectancy
Assuming a student life threshold of 25 years, and a working life till age 60, the span of autumn years beyond 60 is substantial and must be planned for, given the fact that there is no income flow to support it. Given the advancements and innovations in modern medicine and tech-driven comforts that have made lives hassle-free, the average life expectancy is steadily growing across the globe. What does all this mean in financial terms? The fact that we will live longer means we will need to save enough and invest wisely to live life on our own terms, rather than dictated by circumstances.
Standard of Living
Standard of Living implies the manner in which live, how the game of money – of earning, spending, saving and investing – impacts our life. Does it improve our level of comfort, does it help maximise our wealth, and does it help us with value-added possessions above basic necessities.
Closely linked with standard of living is the concept of Quality of Life which implies an individual’s sense of wellbeing including physical and psychological health, financial freedom, and social status. If our income is unable to assure us Quality of Life, something is amiss from our financial and investment planning. Although standard of living and quality of life are subjective concepts, our financial decisions impact them to a great extent which is why financial literacy is extremely important.
Medical Expenses
It is a well-known fact that ailment is a function of age. Consequently, healthcare costs grow in tandem with advancing age, more so in cities and towns where stress has a huge impact on peoples’ health. Hence, it is most important to factor in medical costs in our financial plans and budgets.
In India, there is no concept of social security or universal health coverage, which means the Out of Pocket expenditure on health is invariably phenomenal, which exposes common people to the perils of derailed home budgets and debt traps, especially in the case of serious ailments like cancer and heart disease. Healthcare costs are inherently complex, and one can’t ever estimate the number and types of procedures and tests to be done in the course of treatment.
Further, wrong assumptions about medical insurance lead to last minute shocks in the form of higher-than-anticipated bills. It is, therefore, imperative to set aside a corpus for medical expenses, keeping it distinct from retirement savings and investments. As regards medical insurance, it is best to seek expert advice on choosing from among different heath policies.
So, what do these five facts of life tell us. They highlight the need to put investments in perspective. In the ultimate analysis, what are investments all about? They are all about maximizing returns and minimising risks, which are a function of prudence and patience. Once we put the need to save and invest in perspective, we capture the essence of key investing paradigms, tools, and techniques, thereby making the most of the investing avenues and instruments.
After we arrive at the investible funds after considering the five truths mentioned above, it is important to define our short-term and long-term goals, which in turn would help define our investment goals which may pervade different asset classes. ‘Never put all your eggs in one basket’ may sound like a cliché, but it helps us maximise wealth and minimise risks. No source guarantees consistent returns all the time but collectively helps us move up the value chain of investments.
In the last two decades, different asset classes like equity, debt and gold have outperformed each other at different times. A prudent selection of diversified investments will hence help us profit from the highs of each asset classes, and offset the shortfalls arising from the lows.
None of us want to end up in a financial mess after the festive season is over. It could be a huge credit card bill which cannot be paid off in time. It could mean that you have no money left for your regular investments just because you have spent more money than you actually should.
While your expenses will go up during the festive season and there is not much you can do about it, you can still keep it under control. We tell you 5 ways to avoid overspending in the festive season.
Have a budget
The first and most important thing to do is to have a budget. List down all the expenses you are likely to have, whether it is buying gifts, eating out, going on a holiday and so on and figure out how much you will be spending. If you planned in advance and have a some cash to dip into, that is great, but in case you haven’t, you would need to cut down on your spending.
Track your expenses:
Having a budget is half the battle won. Track your expenses and try to stick to your budget. Every time you overshoot a budget, it should act as a red flag. If you are spending more than your budget in a certain category, you have to cut down on something else. You can overshoot your budget, but only some. If you overspend a lot more it will mean trouble.
Avoid buying on credit as much as possible
It is for moments like this a credit card is for, you would think. Which is true, just that you have to pay off your credit card dues in full every month. Every time you buy a gadget on EMI, like a mobile phone or a watch, that gets added up to your credit card bill. Now there are lot of buy now, pay later options. There are zero interest EMIs, interest free credit up to a certain period and so on. Plus getting such credit is very easy, it takes almost no time and minimal paperwork. Buying on credit is fine, but ask yourself if you can meet your financial commitments going ahead. How much will you pay each month on EMI? Will such purchases put a strain on your finances? Are you paying a very high rate of interest? Ask yourself all these questions before making any purchase. Before taking any credit is very important to be sure that you can pay it off on time. There is nothing worse than being penalised by fines or very high interest rates.
Do not get tempted by discounts
People buy more during the festive season. Online retailers cash in on this and provide huge discounts. Do not fall in the trap of buying something you can do without just because it is selling at a discount. You have already set a budget, you have to do without things that do not fit into your budget. Impulsive purchases are thus a big no no.
Let us take a simple example. An offer says that if you purchase two pairs of jeans, you get one pair free. If you need only one pair of jeans, you should never get two. To sum up, freebies, discounts, cash back offers and free gifts should not influence your buying decisions. Buy only what you need. Also, a big discount is not always a discount. If somebody is offering you a 70 per cent discount, there has to be a caveat. Either the price is inflated or the product may not be of the promised quality. So be very cautious.
Do not fall for the shop and save myth
Every purchase is an expenditure. There is nothing like shop more and save more. If it actually meant savings, you would have ended up saving more money in the festive season. Consider every purchase as an expense which needs to be paid right away or in the future.
This would require a bit of planning, but every bit will be worth your money.
While your expenses will go up during the festive season and there is not much you can do about it, you can still keep it under control. We tell you 5 ways to avoid overspending in the festive season.
Have a budget
The first and most important thing to do is to have a budget. List down all the expenses you are likely to have, whether it is buying gifts, eating out, going on a holiday and so on and figure out how much you will be spending. If you planned in advance and have a some cash to dip into, that is great, but in case you haven’t, you would need to cut down on your spending.
Track your expenses:
Having a budget is half the battle won. Track your expenses and try to stick to your budget. Every time you overshoot a budget, it should act as a red flag. If you are spending more than your budget in a certain category, you have to cut down on something else. You can overshoot your budget, but only some. If you overspend a lot more it will mean trouble.
Avoid buying on credit as much as possible
It is for moments like this a credit card is for, you would think. Which is true, just that you have to pay off your credit card dues in full every month. Every time you buy a gadget on EMI, like a mobile phone or a watch, that gets added up to your credit card bill. Now there are lot of buy now, pay later options. There are zero interest EMIs, interest free credit up to a certain period and so on. Plus getting such credit is very easy, it takes almost no time and minimal paperwork. Buying on credit is fine, but ask yourself if you can meet your financial commitments going ahead. How much will you pay each month on EMI? Will such purchases put a strain on your finances? Are you paying a very high rate of interest? Ask yourself all these questions before making any purchase. Before taking any credit is very important to be sure that you can pay it off on time. There is nothing worse than being penalised by fines or very high interest rates.
Do not get tempted by discounts
People buy more during the festive season. Online retailers cash in on this and provide huge discounts. Do not fall in the trap of buying something you can do without just because it is selling at a discount. You have already set a budget, you have to do without things that do not fit into your budget. Impulsive purchases are thus a big no no.
Let us take a simple example. An offer says that if you purchase two pairs of jeans, you get one pair free. If you need only one pair of jeans, you should never get two. To sum up, freebies, discounts, cash back offers and free gifts should not influence your buying decisions. Buy only what you need. Also, a big discount is not always a discount. If somebody is offering you a 70 per cent discount, there has to be a caveat. Either the price is inflated or the product may not be of the promised quality. So be very cautious.
Do not fall for the shop and save myth
Every purchase is an expenditure. There is nothing like shop more and save more. If it actually meant savings, you would have ended up saving more money in the festive season. Consider every purchase as an expense which needs to be paid right away or in the future.
This would require a bit of planning, but every bit will be worth your money.
You can also take this as an opportunity to review your investments and learn from your past financial mistakes to take corrective measures and embrace newer ideas. While doing so, aim to manage your money prudently and endeavour to make it work harder to generate serious wealth to meet your financial goals.
Here are some wealth creation ideas which you may consider
Rebalance Your Asset Allocation: A crucial step that helps in wealth creation is proper and timely asset allocation. If you feel that your equity exposure is high, you may consider switching at least 30% of your portfolio to debt instruments. Similarly, if your investments are heavily tilted to debt, you may consider pruning and restoring balance. At the current juncture, when stocks are trading at a historical high, it is advisable that equity exposure should be restricted to 65-70% while debt should take care of the rest. A rebalanced portfolio not only helps in protecting the portfolio from market headwinds, it also immensely aids wealth creation.
Start a SIP: A systematic investment plan or SIP should be among your top investment vehicles. Based on your financial goals, risk-taking ability, and tenure, decide on the monthly investment amount through SIP. Only a proportionate SIP amount can yield the desired wealth. In case you are not sure of the amount, use online SIP calculators or take advice from an expert regarding the same. For instance, to accumulate Rs. 1 crore in 20 years, you need to invest a little over Rs. 7,500 every month in funds that offer 15% compounded annual returns. If your investment or returns are lower, you may not meet your target.
Invest In Gold: Investment in gold can act as a hedge against inflation and help diversify your overall portfolio. If you haven’t invested in gold yet, you may consider investing in the yellow metal through Gold ETFs or Sovereign Gold Bonds (SGBs) rather than physical gold. Gold ETFs and SGBs provide better returns, safety, and easy handling. Given the current uncertainty in the financial market and weak economic scenario, gold may turn out to be a great investment in the event of deep cracks in the financial market. Nevertheless, it is advisable to take an exposure of not more than 5-10% in investment instruments with gold as underlying assets.
Invest In Stocks: If you have a considerable lump sum corpus and have a high risk-taking capacity, you may consider direct stock investing. Take help from market experts, do your research, and figure out the 10 most promising stocks with a 2-3-year investment horizon before investing in them. Alternatively, you may start SIP in these stocks every month if you don't have a big corpus. Suppose you have a surplus of Rs 20,000 every month, you may consider utilising this sum in buying smaller quantities of the selected stocks. This way of investment will give you the benefit of averaging out your holdings while creating wealth in the long term.
Invest In A Balanced Advantage Fund: If you are apprehensive of the stock market but desire to make money from equities, you can consider investing in balanced advantage funds (BAFs). These funds have a dynamic asset allocation strategy and tend to rebalance your portfolio daily depending on the stock valuations. BAFs are conservative in their investment approach in equity, and so offer a steady return and reduce erosion of your investment value. Typically, such funds sell high and buy low. At times, there are phases when such an asset allocation strategy of the fund helps it beat the key stock indices as well. If you currently have an equity portfolio with reasonable gains, you may shift up to 30-40% of your total equity assets to BAF in current times through lumpsum investment. If you are a new investor and want to taste equity investment with safety in mind, BAFs are suitable for you.
Consider Investing In Real Estate: Given the current prevailing historically low home loan rates of as low as 6.4%, buying a home for investment could be a nice wealth creation idea. However, do consider your current financial situation as home buying is a big-ticket investment. If it fits in your current assessment, buying a house could be highly rewarding. Do consider the locality, resale value, EMI you can afford, and other out-of-pocket expenses before investing in real estate.
Here are some wealth creation ideas which you may consider
Rebalance Your Asset Allocation: A crucial step that helps in wealth creation is proper and timely asset allocation. If you feel that your equity exposure is high, you may consider switching at least 30% of your portfolio to debt instruments. Similarly, if your investments are heavily tilted to debt, you may consider pruning and restoring balance. At the current juncture, when stocks are trading at a historical high, it is advisable that equity exposure should be restricted to 65-70% while debt should take care of the rest. A rebalanced portfolio not only helps in protecting the portfolio from market headwinds, it also immensely aids wealth creation.
Start a SIP: A systematic investment plan or SIP should be among your top investment vehicles. Based on your financial goals, risk-taking ability, and tenure, decide on the monthly investment amount through SIP. Only a proportionate SIP amount can yield the desired wealth. In case you are not sure of the amount, use online SIP calculators or take advice from an expert regarding the same. For instance, to accumulate Rs. 1 crore in 20 years, you need to invest a little over Rs. 7,500 every month in funds that offer 15% compounded annual returns. If your investment or returns are lower, you may not meet your target.
Invest In Gold: Investment in gold can act as a hedge against inflation and help diversify your overall portfolio. If you haven’t invested in gold yet, you may consider investing in the yellow metal through Gold ETFs or Sovereign Gold Bonds (SGBs) rather than physical gold. Gold ETFs and SGBs provide better returns, safety, and easy handling. Given the current uncertainty in the financial market and weak economic scenario, gold may turn out to be a great investment in the event of deep cracks in the financial market. Nevertheless, it is advisable to take an exposure of not more than 5-10% in investment instruments with gold as underlying assets.
Invest In Stocks: If you have a considerable lump sum corpus and have a high risk-taking capacity, you may consider direct stock investing. Take help from market experts, do your research, and figure out the 10 most promising stocks with a 2-3-year investment horizon before investing in them. Alternatively, you may start SIP in these stocks every month if you don't have a big corpus. Suppose you have a surplus of Rs 20,000 every month, you may consider utilising this sum in buying smaller quantities of the selected stocks. This way of investment will give you the benefit of averaging out your holdings while creating wealth in the long term.
Invest In A Balanced Advantage Fund: If you are apprehensive of the stock market but desire to make money from equities, you can consider investing in balanced advantage funds (BAFs). These funds have a dynamic asset allocation strategy and tend to rebalance your portfolio daily depending on the stock valuations. BAFs are conservative in their investment approach in equity, and so offer a steady return and reduce erosion of your investment value. Typically, such funds sell high and buy low. At times, there are phases when such an asset allocation strategy of the fund helps it beat the key stock indices as well. If you currently have an equity portfolio with reasonable gains, you may shift up to 30-40% of your total equity assets to BAF in current times through lumpsum investment. If you are a new investor and want to taste equity investment with safety in mind, BAFs are suitable for you.
Consider Investing In Real Estate: Given the current prevailing historically low home loan rates of as low as 6.4%, buying a home for investment could be a nice wealth creation idea. However, do consider your current financial situation as home buying is a big-ticket investment. If it fits in your current assessment, buying a house could be highly rewarding. Do consider the locality, resale value, EMI you can afford, and other out-of-pocket expenses before investing in real estate.
The Covid pandemic refuses to go, financial markets remain volatile, and hopes remain high that the good old times will be back. The new fiscal requires you to be smart and have a handle on savings, investment, taxes, expenses and much more. Mentioned below are few moves you can make
Be investment wise
A new financial year requires a fresh assessment to check whether your investments are on track to meet your long-term goals. You must check if there is a need to change or rebalance the asset-allocation mix for optimal results, in the light of developments on the personal front.
Also, a new financial year is a good time to do a check on the health of your portfolio. Financial markets, especially stocks, have done very well in the last one year or so. If even in this situation, some market-linked investments have not well, find out for reasons. If you find a pattern of continued poor performance, weed out under-performers.
Be a regular: If you are in the old tax regime and among those who struggle to meet the deadline for tax-saving investments every financial year, now is the time to get smart. Instead of doing tax-saving investments at the end of February/March 2022, start them from April 2021 for ELSS, NPS, PPF, etc.
Just like your EMIs, you have the option to spread out your investments regularly over the next 12 months in most of these products. This will work well if sometimes, you don’t have enough funds to do the investments at one go.
Besides, delaying the investment process to the end of the year will make you prone to mistakes in the form of choosing the wrong products. Also, if you do equity-linked investments through SIPs, you can average your costs better and avoid risk of timing your investment.
Use tactical opportunities: Instead of frittering away the annual bonus , ex gratia or other one time payments that some employers give during this time, this new financial year offers you the chance to stock up on small-saving schemes and voluntary provident fund. If the circular on the new small savings rates issued on March 31 (withdrawn later) is any indication, interest rates may go down further, before moving up.
Hence, for conservative investors to whom the sovereign guarantee offered by the small-saving schemes is important, schemes such as NSC is a good bet (offers 6.8 per cent) compared to similar tenure bank deposits.
As per the new PF rules, interest on cumulative annual employee contributions above ₹2.5 lakh shall attract income tax at the applicable tax slab, wherever employer is also contributing. Nevertheless, despite the tax, the returns on the VPF continues to be attractive when compared to the interest rates being offered on other debt instruments and it will be a smart move to use this window to your advantage in the new financial year.
Contributions to both the NSC as well as the VPF are eligible for deduction up to to ₹1.5 lakh under Section 80C.
Prep for taxes
The end of FY2020-21 and the start of FY2021-22 have different implications from tax filing point of view.
To do tax return filing for the previous fiscal, you will be required to collect all the necessary documents including details of any foreign asset/income.
Though one may argue the tax filing deadline is some months away, it will not hurt to check Form 26AS online to check whether tax deductions for FY2021 are properly credited. Remember to cross check the Form 16 that will be sent by your employer soon. Start collecting capital gains statements for investments and account statements for bank accounts. Dividends are taxable so keep a note on them too.
For the new financial year, there is a tax-related task you can do right away.
Submit a pragmatic investment declaration, basis on which your employer will deduct taxes each month. Avoid a casual approach towards submission of investment declaration such as mentioning maximum contribution for Section 80C, Section 80D when you very well know you can't invest so much.
While it may lead to a higher take-home salary now due to lower tax deduction, what matters is actually doing those investments at the end of year. Failure to submit investment proofs to your employer could lead to substantial tax outgo in the last 2-3 months of the year and pinch your disposable cash.
Rainy day plans
A new financial year is also a good time to do a check on your emergency funds and insurance cover.
The Covid pandemic has shown the need to have a contingency fund. With salaries cut and expenses rising, many had to break their piggybank to survive last year. This underlines the need to stash away money in the savings pool so that 6-12 months of zero/low income does not impact household finances.
Also, take a re-look at life as well as health insurance needs at the beginning of the financial year. Over time, the needs and lifestyle of your family change. Hence, your insurance cover should also change accordingly. Significant life-changing events such as marriage, the birth of a child, home loans, income change etc. increase your responsibilities. Raise your life coverage amount when renewal comes up this fiscal.
Similarly, medical costs for elderly parents, newborn children and hospitalisation can pinch your pocket. To tide over inflation in medical costs, widen your health cover if necessary.
A new financial year requires a fresh assessment to check whether your investments are on track to meet your long-term goals. You must check if there is a need to change or rebalance the asset-allocation mix for optimal results, in the light of developments on the personal front.
Also, a new financial year is a good time to do a check on the health of your portfolio. Financial markets, especially stocks, have done very well in the last one year or so. If even in this situation, some market-linked investments have not well, find out for reasons. If you find a pattern of continued poor performance, weed out under-performers.
Be a regular: If you are in the old tax regime and among those who struggle to meet the deadline for tax-saving investments every financial year, now is the time to get smart. Instead of doing tax-saving investments at the end of February/March 2022, start them from April 2021 for ELSS, NPS, PPF, etc.
Just like your EMIs, you have the option to spread out your investments regularly over the next 12 months in most of these products. This will work well if sometimes, you don’t have enough funds to do the investments at one go.
Besides, delaying the investment process to the end of the year will make you prone to mistakes in the form of choosing the wrong products. Also, if you do equity-linked investments through SIPs, you can average your costs better and avoid risk of timing your investment.
Use tactical opportunities: Instead of frittering away the annual bonus , ex gratia or other one time payments that some employers give during this time, this new financial year offers you the chance to stock up on small-saving schemes and voluntary provident fund. If the circular on the new small savings rates issued on March 31 (withdrawn later) is any indication, interest rates may go down further, before moving up.
Hence, for conservative investors to whom the sovereign guarantee offered by the small-saving schemes is important, schemes such as NSC is a good bet (offers 6.8 per cent) compared to similar tenure bank deposits.
As per the new PF rules, interest on cumulative annual employee contributions above ₹2.5 lakh shall attract income tax at the applicable tax slab, wherever employer is also contributing. Nevertheless, despite the tax, the returns on the VPF continues to be attractive when compared to the interest rates being offered on other debt instruments and it will be a smart move to use this window to your advantage in the new financial year.
Contributions to both the NSC as well as the VPF are eligible for deduction up to to ₹1.5 lakh under Section 80C.
Prep for taxes
The end of FY2020-21 and the start of FY2021-22 have different implications from tax filing point of view.
To do tax return filing for the previous fiscal, you will be required to collect all the necessary documents including details of any foreign asset/income.
Though one may argue the tax filing deadline is some months away, it will not hurt to check Form 26AS online to check whether tax deductions for FY2021 are properly credited. Remember to cross check the Form 16 that will be sent by your employer soon. Start collecting capital gains statements for investments and account statements for bank accounts. Dividends are taxable so keep a note on them too.
For the new financial year, there is a tax-related task you can do right away.
Submit a pragmatic investment declaration, basis on which your employer will deduct taxes each month. Avoid a casual approach towards submission of investment declaration such as mentioning maximum contribution for Section 80C, Section 80D when you very well know you can't invest so much.
While it may lead to a higher take-home salary now due to lower tax deduction, what matters is actually doing those investments at the end of year. Failure to submit investment proofs to your employer could lead to substantial tax outgo in the last 2-3 months of the year and pinch your disposable cash.
Rainy day plans
A new financial year is also a good time to do a check on your emergency funds and insurance cover.
The Covid pandemic has shown the need to have a contingency fund. With salaries cut and expenses rising, many had to break their piggybank to survive last year. This underlines the need to stash away money in the savings pool so that 6-12 months of zero/low income does not impact household finances.
Also, take a re-look at life as well as health insurance needs at the beginning of the financial year. Over time, the needs and lifestyle of your family change. Hence, your insurance cover should also change accordingly. Significant life-changing events such as marriage, the birth of a child, home loans, income change etc. increase your responsibilities. Raise your life coverage amount when renewal comes up this fiscal.
Similarly, medical costs for elderly parents, newborn children and hospitalisation can pinch your pocket. To tide over inflation in medical costs, widen your health cover if necessary.