It is that time of the year when we look ahead to new beginnings, new strategies and renewed hopes and aspirations. Here are five essential aspects that are recommended at the beginning of the financial year, for the continuous improvement of your financial well-being:
(I) Review Your Portfolio:
While long-term investing is essential for wealth accumulation, this does not mean one should invest and forget about it. A portfolio review should be done on a regular basis, and the beginning of the financial year is an ideal time to do so. A quick review will show the performance of each asset class. Review and re-value your investments in Real Estate, Gold, Financial Instruments, Art/Antiques or any other category. If one asset class is growing or deteriorating rapidly, it may be time to have a re-think and reorganize.
For financial investments, you may need to reassess whether your current mix of investments match with your long-term objectives. If you are young and looking for 70-30 ratio of equity and debt investments, or if you are old enough to have a 30-70 equity-debt mix, you may like to re-look at your investments and re-align your current portfolio to be in sync with your requirements.
If you are investing in shares, review each company in your portfolio and if you invest in mutual funds, identify the performers and the non-performers. While it is tempting to get rid of underperformers, one approach such decisions cautiously. Sometimes, it’s worth your while to wait it out when you know that the investment has intrinsic strength in the long term. It may also be worth looking at the super-performers and evaluate whether they have balance steam ahead. After all, selling at the right moment is the key to profits in your investments and you are the sole judge for the same.
(II) Review Your Insurances:
Our responsibilities increase significantly after major life-events like marriage, becoming a parent, purchasing home, etc. We must ensure that our life insurance policy adequately covers the new responsibilities. Hence, you must return to calculations you used to determine the correct coverage, add the extra amount needed to cover the additional responsibilities and get any additional coverage required.
(III) Review Your Borrowings:
Regular asset reviews are required for financial prudence. Why not apply the same rigour to your liabilities? Like loans – for example, if you have taken a home loan, it is critical that you review it periodically as it is a long-term investment, typically lasting 15-20 years. This period is long enough for a borrower’s life and personal finances to alter due to a variety of causes – like changes in financial status, interest rates, government policies, etc. A regular evaluation assists in making financially sound decisions for the loan’s foreclosure, balance transfer, or top-up.
(IV) Start Tax Planning:
It is ideal to begin tax preparation early in the fiscal year as this provides you enough time to figure how much to invest to save the most money on taxes and weigh all possibilities. With the entire year ahead, you can spread out your investments appropriately. Having SIP that helps you save tax throughout the course of the year ensures that you benefit from market ups and downs. If you wait until the last minute though, you will be forced to invest even if the markets are at an all-time high and there is a chance they could fall.
(V) Increase Investments:
Ideally, one should increase one’s SIP investment by 10% every year with a rise in income. This helps reach one’s financial goals faster.
The beginning of the financial year is a good time to revisit your financial goals and act appropriately. Wishing you financial success always!
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