Money matters are an integral part of life, and managing them becomes a priority. If you need help with financial planning in the new financial year 2023-24, read on to know how to manage your finances in the new financial year.
Finance is personal
As the name suggests, personal financial planning refers to all the measures you take to handle your money better. It includes figuring out methods of income generation, keeping a check on spending habits, managing savings, segregating expenses, planning investments, and a lot more.
In other words, careful budgeting is what personal finance is all about. It is a never-ending process and is required for both short-term and long-term goals.
Need for personal finance management
If you plan your finances properly, you can avoid breaking your back with the burden of unforeseen expenses. If you plan in advance, it will help you achieve your long-term financial goals.
We often tend to ignore small expenses, but they can become a massive burden if you let them pile up. Apart from managing your expenses, you must also plan your savings and investments. This helps you create a secure financial future for you and your family.
How to sort your finances better
Before planning your expenses and investments, you should sort your sources of income to calculate your total earnings. Once that is taken care of, actual financial planning starts. Listed below are the five major areas that you need to focus on:
Tax planning and declaration: If you are liable to pay income tax, there are several ways through which you can reduce your tax liability. It starts with making certain tax-saving investments, claiming exemptions, and making timely income tax payments. If it overwhelms you, you can always seek the help of a tax advisor for the same.
Saving plan: There is a very minute difference between savings and investments. When you have surplus cash that you put aside, that is your savings. You can use it to meet your short-term or future needs. However, having huge savings is also not a good idea as it doesn’t generate high returns. You should consult a financial advisor who can guide you on how to invest your savings.
Investment plan: You can pick a suitable financial instrument depending on your goals. People commonly do it to generate income through their investments. Some popular instruments you can choose from are stocks, debentures, fixed deposits, and mutual funds. However, remember that investment opportunities come with risks, and you can also incur losses sometimes. Always consult an advisor who will help you chart out a plan.
Insurance plans: Insurance helps to protect your family’s finances against shocks due to adverse situations like illness or the untimely demise of an earning member. To protect against loss of life of an earning member, you can choose to take out a term insurance policy, and to mitigate the risk of hospitalisation and other illnesses, you can buy a health insurance policy. Additionally, if you own a personal motor vehicle, it is always a good idea to buy insurance for your vehicle. It is also mandatory legally to have a valid insurance on your vehicle.
Expenses: Personal finance management is useless if you can’t keep track of your expenses. There are various fixed and variable expenses a person incurs monthly, like paying rent and EMIs, as well as shopping and travelling. Certain thumb rules help you manage your finances better.
Takeaway
When it comes to financial planning, the sooner you start, the better it will work out for you later in life. However, it's still not too late if you have not yet started.
Remember, you won’t see the results in a day. Getting accustomed to the discipline could take months of practice before you get comfortable with the changes. But once you get past the transition phase, it will get easier, and you will start seeing the desired changes in your bank account.
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