The beginning of the year is a good time to start planning your finances for the coming year. Here's a quick guide on how to improve your finances in the coming year and ranges from small things to bigger aspects which shape your finances.
Set yearly budget for big-ticket expenses: Whether it is going on an international vacation or purchasing a high-value item for your house, you should plan in advance to make sure you don't run short of funds when you need them. When the year begins, make a plan of your likely big-ticket expenses during the year, and plan your investments accordingly.
Joint budgeting with your spouse: If you have planned your finances individually and have not involved your partner, then this is the time to change. Planning financial matters as a family, taking into account both your income as well as your spouse's and keeping in mind both the short term as well as long term goals can go a long way in helping you lead a stress-free married life. Joint planning also helps in making better use of the money you earn.
Retirement Planning: Individuals, especially in their 20s, do not take retirement seriously and ignore saving and investing for this purpose. If you haven't yet thought about this, now is the time. It is never too late to start planning for those golden years, and the earlier you start off the better. Even if you already have your retirement plans in place, try and boost the contribution towards this, as inflation and increased cost of living can get the better of you.
Reduce debt on your books: Although this is easier said than done, outstanding debt can be reduced by making effective use of bonuses, windfalls or any one-time gains you receive this year. Instead of splurging this money on luxuries, which may not be an immediate necessity, use this to part pre-pay outstanding home loans or vehicle loans to reduce your interest outflow over the long term.
Explore re-financing options: If you have a home loan which carries an interest rate higher than that offered by competitors, you might be making a mistake by continuing your home loan with the same lender. Evaluate options in the market and explore the option of your loan being refinanced by some other lender, who offers a lower interest rate. This should be done on priority next year, as you can save a significant amount by switching banks or opting for a lower interest rate loan. Remember to consider processing fees and other charges imposed by the new lender, when you shift the loan.
Organize paperwork and update all information in documents: Most of you might not have updated your personal information in your investments, banks, credit cards, demat accounts, insurance policies, PAN card, etc. This information could be change of address, change of contact number, including nominee name, etc. Updating all necessary information on time helps you achieve smooth, stress-free transactions. Similarly it is also important to organize your paperwork to help you manage your money in an efficient manner.
Watch out for discounts, deals and offers while shopping: While discounts and offers should not be the sole reason for your shopping, these can help you save considerable amount of money if you choose correctly. Instead of shopping randomly even when you do not need something, push such purchases to festival seasons when retailers offer good discounts. Plan your purchases for the entire year in the beginning of the year itself, as money saved is money earned.
Start a contingency fund: If you do not have an emergency fund in place which has atleast six months of your expenses, then this is when you should start planning for it. A contingency fund is very important to take care of life's uncertainties and it is highly recommended to have this in place at the earliest.
Start your tax planning in the beginning of the year: Most of us delay tax planning to the last few months of the financial year, which results in unwise choice of investments to reduce tax. This year, start planning your investments for tax purposes in April itself, when the financial year begins. Regular investing also brings about a discipline, helping in slowly but steadily building your wealth.
Automate your investments as much as possible: Manually putting money in various investment avenues may be time-consuming and you may also forget to do the same. Wherever possible, try to automate such investments, to help you save on both time and effort. Further, you can be eligible for discounts and additional bonus if you make timely payment in some cases.
These small steps go a long way in helping you build your wealth. Follow the above tips to help you to improve your money matters in the New Year. Happy investing in the New Year.
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