Another year has come to an end. We are once again at the point of retrospection, coming up with new resolutions, and working toward a better future.
And considering all the experiences we have had in the last year, it is time to reevaluate, set new goals, and work towards a brighter future.
Besides your Health, family and work which definitely requires your attention, your Personal finance also deserves your time.
You may be earning well, but wellness comes from Good Management. Healthy Finances help bring wellness in life. Always remember, having more money may not always be to your advantage, but the Simple, Organized and Goal oriented financial life, keeps you well managed and happy in money matters. And whatever you do there’s always scope of improvement.
What does Fine tuning of Finances mean?
Fine tuning in dictionary terms means to make small adjustments to (Something) in order to achieve the best or a Desired Performance.
As the radio and musical instruments need fine tuning for catching the proper frequency, so too does our financial life require fine tuning when we find that something is causing hindrances to our whole plan and may cause some disruption in achieving our goals.
What all could be Fine tuned in Personal Finances?
1. Your Budget
In the past year, have you ever found yourself in a position where you had to think about discontinuing or withdrawing your savings to pay for another important need, or ever thought about rolling over the credit card balance? or did you spend on some unplanned expenses?… If yes, it is high time for you to reevaluate your budget and fine tune it, so you can manage such a situation in a better way if it repeats in future.
Maintaining our financial house is the whole point of budgeting.
Budgeting helps us manage our cash flow so that we can generate enough surpluses for our future investments, and also to arrange for the unexpected and important.
Make a list of your expenses that you underestimated or overspent on.
It has been my experience that many people forget to factor in annual expenses like festival expenses, expenses related to sudden travel or guest visits or family weddings, expenses related to birthdays, tax payments, etc., when preparing their monthly budget.
Taking such annual expenses into account and making provision in your monthly budget is advisable.
Also, it’s best if your miscellaneous expenses portion is between 5-10% of your estimated expenses.
2. Your Insurance policies
Have a look at your Insurance Policies. Are they still Valid as per the goals you have or you are just continuing them for the sake of it? You may fear booking losses or just ignoring them as they might be a small portion of your overall net worth.
Review them from a Sum Assured perspective, answer their role in your financial life, as in if they are actually contributing something. If not, then it’s wise to surrender/discontinue your policy.
This may make your budget or cash flow situation more lively and you have more to allocate to your financial goals now.
3. Your Savings & Investment
Associate the word savings with near-term goals and the investment with long-term goals. Last year was average for equity but still we did not fell like the world markets, and also touched all time high. Even the interest rates were on rise which impacted negatively on the debt funds.
Now when Interest rates are quite high, the debt funds are expected to perform well and recover from low returns shown in the last few years.
4. Your TAX AND Estate planning
There is very little scope of saving on taxes if you have already used 80C and 80D benefits. Yes, there are more but not available to all. You may look at creating tax files, take advantage of gifting etc. to save more taxes. However, April every year is the best time to review your Tax Plan.
You may review your Estate Plan too. If you have added any new asset or Liability in your Financial profile, you may like to review your WILL, and make the necessary changes.
However, changes in WILL are not possible every year , so once and for all, until there is any major change which requires incorporation, it is better to add one Residual clause in the WILL. As in “if I forgot to mention any specific asset or liability…or add new over a period of time, then that should go to …..”
Remember, financial Planning is never complete without proper Estate Planning. You may also like to consider Private Trust as an alternative to WILL. Don’t forget to give nominations in your bank accounts, insurance policies, mutual funds and other financial instruments for comfortable distribution as and when needed.
Making financial life comfortable is the whole purpose of financial planning. And it’s not about making resolutions and forgetting, but better to make it a habit to sit with your finances once every quarter.