While the Calendar New Year is the perfect time to form your New Year Resolution. The Financial New Year also allows us to make our Resolutions. And no, it’s not about reading books or joining a gym. It’s about staying ahead of the curve and managing your Finances in a proactive way. It’s time for you to form your New Financial Year Resolution.
What are the Financial Resolutions?
While there are lots of fun Resolutions for a Calendar New Year, Financial New Year Resolutions will be far more impact-full and worthwhile. The beginning of a Financial Year allows Individuals to ask this very important question, “What do I do with my money?“.
Form a Budget that you’ll stick to
How many times have you planned something and it hasn’t gone as per your plan? More times than you might remember, right? Forming a realistic Budget is very important as “A Budget tells your money where to go, Instead of wondering where it went“. The benefits if one follows a Budget will always outweigh someone who didn’t.
A Budget is detrimental when it comes to pre-planning your finances. You should form a Budget as per your financial goals. Because a Budget helps to segregate your money, have a contingency fund for emergencies, keeps a check on bad spending habits and helps to focus on the bigger picture.
We get it! Sticking to a Budget is hard, often challenging. But, Let’s not forget the profound satisfaction that you’ll feel when you follow your Budget.
Understanding your Tax Liability- Budget 2020
Budget 2020 mandated several changes in Chapter VI A Deductions, abolishing the Dividend Distribution Tax (DDT), Applicability of Tax Audit and Change in the criteria for Residential Status.
However, the biggest change is the introduction of an Optional New Tax Regime. The Taxability under this regime changes completely. Hence it is advisable for individuals to understand the different changes.
P.S. In case you missed the Budget 2020. Worry not, we got you covered- Budget 2020 : Highlights.
For an Individual, deciding which Tax Regime to follow is very important. You should take this decision after calculations and not speculations. For a common man, calculating his taxable income can be a tricky affair. Hence, we build a Tax Calculator Tool that can help ease the burden.
Re-balance your Portfolio
Ending of the Financial Year brings an opportunity to re-balance your trading portfolio. Re-balancing Portfolio is essentially buying and selling of stocks until the desired level of asset allocation is reached.
Traders can also reduce their taxability by setting off their realized losses against realized profits. This method is called Tax-loss harvesting.
Re-balancing your portfolios also mean shedding off underperforming assets and re-evaluating your risk appetite.
Pursue your growth plans
A new Financial Year brings an opportunity to rethink, ‘What are my Business Goals?’. It could be expanding to a new geographic, or extending the product line, deciding a growth plan for your business and acting upon it is very important.
This time of the year allows business owners to sit back and contemplate on their businesses. If your company is outperforming, maybe its time to expand into different geographies, or in case it isn’t performing as desired, it may be the right time to cut the dead weight.
Raise Funds
For a startup, funds are like the ‘Apple of Eden‘. Hence, as a Startup, deciding whether you need an Investor or not is extremely detrimental. Having decided, finding the correct investor, planning the funding and allocating these funds in a way that brings the best output needs to be done.
Startups can utilize these funds to hire new talent, do more research, focus on product building or branding.
Note- It is not necessary for all startups to have an investor. The decision depends on the nature of the business and the ultimate goal of the business.
Start Saving
You might have read “Never Spend your Money before you have earned it“. As good as these quotes sound, it forgot to mention a very important step, i.e Save before you spend.
As a general rule of thumb, it is advisable to save at least 10% of your income each month. A major misconception that people have is treating Savings and Retirement fund just the same. Those two are poles apart, but we’ll get back to Retirement Fund later.
A Major benefit of savings is ‘Money working for you‘. Picture this: You save 10% of your monthly salary and put it in a Savings Account. Not only your principal amount will grow with monthly Deposits, in time you’ll receive interest on it as well.
Another perk of savings is that you can claim Tax Deductions on them as well. Saving under Chapter VIA, an Individual can claim up to INR 1.5 lakh worth of Tax Deductions annually.
Becoming Debt free
Nowadays, Debt has become very common for Individuals and Businesses. We understand, sometimes businesses/individuals might seek capital in the form of debt, and it might be the right thing at that time. But it doesn’t mean that businesses/individuals should allow debt to pile up.
Debt should be taken for appreciating assets like real estate. However, bad debts make you less agile, limit your growth opportunities and bring a lot of stress. Since, books of accounts start afresh with ta new Financial Year, it marks a perfect opportunity to plan out the ‘repayment of the debt’.
Not only it will increase your credit score but it will also increase your financial security.
Buy Insurance
Even though crores of individuals in India have an insurance, there is still a large section of the society which doesn’t. The idea of Insurance has exploded in the past decade and it has become very mainstream. Insurance is a way to ensure that in an unwanted scenario of loss, your interests are covered and damages are mitigated.
Insurance can secure your home, vehicle, cover medical expenses for you and your family. You can also avail Tax benefits of INR 1.5 Lakh under Chapter VI A while buying Insurance.
Start Investing
“Don’t work for money; make it work for you“. And the logical way to do that is via smart investments. In this day and age, investment options are plentiful. And so it has become increasingly easy to loose track of our Financial Goals. We can’t emphasize enough on the importance of investing.
If planned properly, you could build wealth, save on taxes, have a retirement fund and always stay ahead of inflation. The idea of investing might seem far fetched for the youth. But make no mistakes, investing from a young age will build the foundation of your life.
However, it goes without saying that investments can be a tricky subject. Many newbies can loose incredible amount of wealth if not planned correctly.
So there you have it. Our 9 New Financial Year resolution. Following these resolutions will undoubtedly bring order in your finances. Which will allow you to lead a happier and hassle-free life.