With 2020 coming in just around the corner, it’s time to bring out your notepad and jot down some financial goals for the new year. By introspecting about your targets for this year, you can get a better idea of what your financial ambitions for the short term and the long term are. Having a plan makes it easier to execute the strategies needed to achieve your financial New Year’s resolutions. If you’re not sure about the New Year financial goals that you intend to chase, here’s a quick guide that can give you some ideas about the financial ambitions you should set your sights on.
Draw up a budget and stick to it
Budgeting is one of the most basic financial New Year’s resolutions to adopt. It can help you get a clear picture of where you stand financially. If you aren’t in the habit of drawing up your own personal balance sheet, this new year may be the perfect time to start. If you earn income from multiple sources like deposits, an investment, or even a side hustle, keep a log of all your income. Stack it up against your expenses and weed out discretionary costs, so you get a better idea of how much disposable income you’re actually left with each month. Once you know this, you can pick out your financial goals accordingly.
Improve your credit profile
Your credit score can greatly affect your ability to borrow money from primary lenders like banks and financial institutions. So, focus on improving your credit profit this year. This way, you’ll find it easier to avail a loan later in life, if you need to. To better your credit score, pay off credit card bills before they’re due. Additionally, if you’ve already borrowed money, try and pay off your debts as early as possible. Repay your EMIs diligently, without skipping on any monthly installment. Additionally, if you must borrow again, take advantage of the provisions of the Income Tax Act like section 24, which allow you to claim deductions on housing loan interest.
Obtain an insurance cover
Investing in insurance is another important target to add to your list of financial goals for the new year. If you have no insurance cover at all, it’s advisable to start by investing in a life insurance plan. The great thing about an insurance cover is that it not only offers financial security to your dependents, but it also allows you to enjoy some tax relief, since you can claim the premium paid as a deduction under section 80. Alternatively, you could also invest in a term insurance plan to enjoy lower premium costs. You can learn more about Term Insurance by browsing the website for the various Term Plans offered by PNB MetLife.
Create an emergency fund
This is another essential aspect to focus on as part of your New Year financial goals. An emergency fund can help you get through tough times like the death of a family member or an unexpected medical crisis that requires a sizeable sum of money to treat or manage. To start with, build an emergency fund that is as large as 6 months’ earnings. It can be tempting to set aside a chunk of your monthly income right away, so you can reach the desired level of funds you intend to set aside in your safety net. However, it’s prudent to set aside a little bit each month and build your fund gradually, over the course of the year. In case you enjoy a sudden windfall like a bonus, you could add it to your emergency fund, so it grows faster.
Invest in tax-saving instruments
Finally, to wrap up your financial goals for the new year, try and invest in tax-saving instruments like ULIPs or ELSS. These investment options can help you grow your money safely over the coming years, while simultaneously offering you the benefit of tax savings. It’s advisable that you try not to cram all your investments for the end of the financial year simply to meet the deduction limits. Instead, take a while to look at the many investment instruments available, compare them, and identify the ones that fit in with your short-term and long-term financial goals. By investing smartly in tax-saving instruments, you can reduce your tax burden as well.
With these ideas to guide you, you can gain a better insight into what your financial ambitions for the new year are. Once you’ve checked off some of your short-term goals, such as drawing up a budget and obtaining an insurance cover, you can move on to fulfilling your long-term objectives like buying a house or taking a vacation abroad. With the right kind of planning, all your financial goals for the new year can be easily achieved.
The income tax is levied on all earning individuals who fall under a taxable income bracket. The income tax is paid to the Government of India and is charged annually. However, there are several tax deductions and exemptions that you can claim to lower your tax liability. The Income Tax Calculator helps you ascertain your tax output for a financial year based on your taxable income. This can help you plan well and save tax using the tax-saving deductions and exemptions, if possible.
- *Tax benefits are subject to conditions and other provisions of the Indian tax laws and are subject to amendments made thereto from time to time.
The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.
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