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10 Essential Things To Do At The Start Of The Financial Year | Financial Goals Planning and Review - YouTube
Channel: ET Money
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[Music]
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the month
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of april is typically the time when most
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people expect a good appraisal a raise
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and a promotion
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and while we can't give you any of these
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but what we can do for you
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is to present a checklist of 10
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essential tasks that one must do at the
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start of every financial year
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not very exciting is it but here's the
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kicker if you were to do these 10 things
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properly and religiously we are quite
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certain that this will go a long way in
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helping you achieve your financial goals
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faster
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and with a lot less stress so let's dive
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in and start with point number one
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in our checklist
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the months of february and march is when
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the government announces
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a number of changes and modifications in
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the tax loss
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the understanding and the compliance to
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these should be treated as urgent
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and important by all investors and
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taxpayers
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some of the new and recent changes in
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the last two months
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include things like taxes on epf
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contributions
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capital gains on ulip maturity proceeds
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the
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extension of deductions on home loan
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interest and many more
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now most of these changes come with a
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set of terms and conditions which can be
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read and understood
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on the internet quite easily through
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news articles blogs
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and youtube videos which will cover a
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number of such topics
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in addition to these april is also the
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month when you need to decide on the tax
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regime you wish to choose
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which means you can either go with the
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older tax regime which has
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a higher tax lab but offers many tax
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deductions
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or it can go with the new one with no
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deductions but which has
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a lower tax lap this is something that
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needs to be chosen early in the
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financial year
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and one can expect a note from your
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payroll or finance department
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anytime now so please don't forget to do
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your homework when it comes to taxes
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the start of the financial year is a
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great time to review the progress you've
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made towards your financial goals
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of course the first step to reviewing
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your goals is to have
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a financial goal in the first place so
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if you haven't written down these
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financial goals yet
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the month of april will be a good time
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to do so
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the general template on creating
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financial goals is that they should be
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specific
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measurable achievable realistic and
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time bound to really make sense to
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anyone which means
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instead of saying i want to be rich or i
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want to save for a vacation
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use the smart rules of goal setting
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which really helps in defining the
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entire process of planning and achieving
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the goals
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an important reason why financial goals
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should be reviewed is to do with the
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many
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internal and external factors that
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surround us
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for example some tweaking of your goals
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might be required
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in case there are any changes to
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internal factors
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like changes in your income any new
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expenses that might have cropped up
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or if there are any new goals etcetera
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similarly there are external factors
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like when the finance minister changes
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the tax labs
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which might reduce your take-home salary
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or maybe if the car you want to buy is
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now 15
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costlier due to a sudden increase in the
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metal prices
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so since there are a lot of things that
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are happening around us
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all the time it will be in your interest
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to know
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where you stand with respect to each of
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your financial goals
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and if any changes are required towards
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the achievement of these goals
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[Music]
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a periodic review of your mutual funds
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and stock portfolio is very important
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and it's a fairly big topic so we'll
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have a video on this very soon but to
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quickly explain
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what this review should look like there
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are three parts that one needs to take
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particular care of
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one where do you stand with respect to
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your asset allocation
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two an assessment of the portfolio
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performance
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and finally the rebalancing of the
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portfolio to get things back on track
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so let's start with asset allocation and
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one of the best resources on asset
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allocation
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is available on the et money youtube
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channel itself
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it's a pretty popular video we have and
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i'll be sure to attach a link to that
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in the description below so the task for
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the month of
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april is to ensure that you have
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strategic asset allocation plans ready
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for your short medium and long term
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goals
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and once you have this map ready we
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start looking at the portfolio
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performance
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this part of your review starts by first
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identifying the under performance
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or the upcoming performance here you
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will want to understand
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each fund's performance consistency of
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returns
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risk score comparison with the benchmark
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and its portfolio composition to have a
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better idea of what to expect from each
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fund
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for example in the case of a debt fund
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while you might be tempted to go for a
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fund which has a historically
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high performance level but then it's
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also important to check out the credit
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risk within the portfolio itself
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so that your principal is not at risk
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there are many such nuances that one
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should review but if you want some help
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then do use the et money ranking and
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rating feature
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on our app and website which helps you
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narrow down your choices and it's a very
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handy tool to have
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the third and final step in your
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portfolio review is for you to rebalance
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your portfolio
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and bring it back to your original asset
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allocation
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while doing rebalancing it is important
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for the investor to understand some of
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the more finer aspects
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of which funds to buy which funds to
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sell the exit load the capital gains tax
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harvesting etc
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in fact all these three steps that is
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the asset allocation the portfolio
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performance
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and the rebalancing might look a bit
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daunting if you're doing it for the
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first time
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but the data we've compiled from real
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eaty money users
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shows that users who religiously do
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these three steps
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often end up with a higher portfolio
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return at a much
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lower risk as compared to ones who don't
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review and rectify their portfolio
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so that's one good incentive for all of
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us which substantiates the importance of
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reviewing your mutual fund portfolio
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on a periodic basis
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april is also the month when most
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individuals especially the salaried ones
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receive their salary increments
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now most literature we have read would
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say that if you get an increment of 20
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then your investments should increase by
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20
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but that might not be the right way of
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looking at it
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so say you receive that 20 increment and
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your salary jumps
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from 1 lakh rupees to 1.2 lakh rupees
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this means there's an extra 20 000
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rupees that's available to you
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now if you've been investing 10 percent
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of your salary towards an sip the old
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logic
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is to increase it from 10 000 rupees a
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month to 12 000 rupees
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but instead of doing that try to really
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up your investments this financial year
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by using a larger part of your 20 000
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increment
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and may be going as high as allocating
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30 000 rupees towards your monthly sip
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remember the more you can allocate
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towards your investments
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especially at a younger age the larger
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will be your wealth corpus
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[Music]
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i recently visited a chartered
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accountant's office and
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on one of the office walls was written a
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very interesting quote which
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said you must pay taxes but there's no
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law that says you have to leave a tip
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in other words tax planning is an
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important activity and ensures that
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you're not
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leaving any money on the table now tax
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planning is often done
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as a combination of products which
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generally include aliases or tax saving
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mutual funds
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nps or the national pension system
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the public provident fund or ppf may be
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an lic policy and of course
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life and health insurance policies the
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reasons why
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it's advisable to invest in products
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like elss
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nps and ppf in april or as early as
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possible
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is to take advantage of the compounding
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benefits that help you earn
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more from your investments in addition
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to extra money there is also the
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convenience factor
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as most people find investing some
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amount of money
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every month more convenient than having
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to invest a larger lump sum amount
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so do take some time this april and plan
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out your tax saving instruments that
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work best for you
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or better still use the et money tax
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module that helps you save
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up to 78 000 in taxes with structured
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investments in
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elss nps term insurance and health
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insurance plans
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[Music]
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there are many reasons that require a
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review of your term and health insurance
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policies
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for one it is important that your
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policies are matching up with any
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changes in your life or lifestyle
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for example a review of your term
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insurance is warranted
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if there have been any major changes in
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your monthly expenses the number of
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dependents
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or if you have taken additional
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liabilities onto yourself like a home
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loan
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a second reason for the review relates
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to ensuring that the policy is in line
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with the prevailing external environment
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for example
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india sees a medical inflation of 12 to
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15
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every year which means a five lakh
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policy purchased in 2010 would in
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reality
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be offering a coverage of only 1.5 lakhs
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in today's money
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and then there is a third reason for
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reviewing your term and health policies
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which is to do with the evolving nature
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of the insurance industry
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what i mean by that is that insurance
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companies are getting more
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and more competitive which often leads
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to some companies
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offering more value in the form of
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better features
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at the same premium or the same features
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but at a lower price
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similarly there are more innovative
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insurance policies that are being
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introduced
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in health insurance which means one can
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port out their existing policies
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and opt for a better health insurance
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plan which is more suited to your needs
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so if you have any questions on how to
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choose the best
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health insurance plan or the
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step-by-step process of selecting the
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best term insurance policy
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then do watch the many videos on
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insurance
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on the et money youtube channel
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[Music]
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as you create your financial roadmap in
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the month of april
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don't forget to check your credit score
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even if you're not seeking a loan or a
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credit product
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and there are three reasons why we say
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so firstly a credit score check is
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helpful
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in monitoring your past financial
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actions which means
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if you notice something that is bringing
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down your credit score in your credit
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report
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you can easily avoid that action
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altogether in the future
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which will again spruce up your score a
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second reason
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relates to ensuring the accuracy of
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credit information
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now sometimes a low credit score can be
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the result of an error
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or inaccurate feeding of information by
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the loan provider or the credit bureau
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by monitoring your credit score you can
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report any such inaccuracies
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and get the same rectified and finally
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a third reason is where if you find that
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your credit scores have improved
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it gives you an option to seek a better
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credit card or receive a better loan
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offer from your existing or new credit
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card or loan provider
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this might mean more reward points less
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interest special privileges
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all of which will go a long way in
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making you happier and richer
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so if you haven't taken a credit score
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or haven't updated it in the last six
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months
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do access the free credit score and
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credit reports section
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we have enabled on et money for our
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users
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like birthdays and anniversaries all
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financial events should be a part of
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your calendar
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here are some events you should
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definitely have as a part of your
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calendar
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these include the date of filing your
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income tax returns the date of
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submitting your financial documents to
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the company's payroll department
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your ppf contribution date your nps
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contribution date
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the payment of your health and term
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insurance premium the assigned date for
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rebalancing your investments
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and many more such financial items it's
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a very small thing to do but the simple
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calendar of your financial tasks
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will go a long way in ensuring your
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fiscal discipline
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and will save you from many unnecessary
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complications
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in the future
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people often ask us what do you really
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mean by financial literacy
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the simple answer to this is a basic
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understanding of
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six financial matters which are one how
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to budget your money
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two how to set financial goals three how
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to save money
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four the basics of debt which includes
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loans credit cards and credit scores
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the fifth point is on how taxes work
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and point number six is on how investing
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works especially fixed deposits and
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mutual funds
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the importance of having an
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understanding of these six
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basic areas cannot be understated so
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read books on personal finance
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read articles on the et money blog watch
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our youtube channel
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listen to financial podcasts be
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intellectually curious
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and do what it takes to ensure your
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financial knowledge is improving
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every single month
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[Music]
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the final task on your financial year
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checklist might seem a little different
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but it sort of follows the pattern
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after all we've talked about budgeting
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saving taxes
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ensuring investment so it's very logical
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to look at the income side of things and
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having a side hustle
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fits in perfectly with improving your
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financial muscle
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a side hustle or as some people call it
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a second or hobby income
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can be a very rewarding and satisfying
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experience which not only adds to your
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income
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but can also help develop new skills
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build your personal brand and help you
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achieve
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financial freedom much faster you can
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build your second
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income in many many ways such as buying
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and selling of
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used household items writing a blog
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starting a youtube channel
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by creating logo designs selling
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photographs you clicked on a vacation
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and there are hundreds of other
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opportunities so if you haven't thought
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of it this way
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do figure out what you're good at and do
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try to build a side hustle for yourself
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this financial year and with this we
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conclude our 10
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point checklist of things you need to do
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at the start of every financial year
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i sure hope you picked up some important
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points from this video and if you have
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any questions for us
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do send them across in the comments box
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below don't forget to subscribe to our
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channel
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and share this video over whatsapp
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facebook and twitter
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with your friends and connections thank
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you for your time and we look forward to
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catching up with you next week with
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another insightful video
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until then mutual fund investments are
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subject to market risks
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read all scheme related documents
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carefully
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