Here’s how you can begin effective financial planning for FY22

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As we near the beginning of the new financial year, it warrants a re-look at your money matters. If you get some easy steps going right from April, you may end with lesser stress and more money in your wallet a year later.

Budget it

Spend your money smartly

Instead of cutting your expenses, go for smart spending. Ever thought of timing your expenses ? Think of that high-end phone which you’re eyeing, hold your urge to buy at its peak and wait for prices to cool off.

Automate your SIPs, investments in FD/PPF, equity saving schemes, mutual funds right after when you get your pay check. The lesser money at your disposal will mean lesser spends on wants.

Look at using apps, credit cards and loyalty programmes that can help you pocket a few discounts on your needs. It may take will, but unsubscribing from those apps which lure you to spend more on your wants may also be a wise thing to do.

Don’t fall into that debt trap

The beginning of a financial year is a good time to take stock of your loans. Check the interest rates payable on them and the prepayment charges if any and begin by targeting the high cost loans first, irrespective of the loan amount.

Home loans come with tax benefits and lower interest rates compared to high cost personal loans so try to close the latter as soon as possible.

Did you know that credit card dues are the most expensive debt? If you do not pay your credit card bills on time, you end up paying whopping 35-40%. Have your alarms set and come what may pay your credit card bills on time and don’t sit on a pile of debt by using credit cards for unwanted things!

Set your goals

Writing down your aspirations in the form of financial goals can really help invest better. One should ideally  define both short and long term goals and expressing these goals in money terms and in a time bound manner is even better.

Short term goals may include your next car or even your next vacation while long term could include marriage, education of children, retirement. Yes the planning and calculations will take time but it is worth it.

Once you have your goals set, decide on how will you create that corpus, which investments will get you to achieve that goal in time. Say for short term goals, investing money in less risky investment avenues like liquid funds, FDs may help while for a long term financial goal such as retirement, one   look at exploring riskier but high return investment options such as equities and equity mutual funds.

Tackle that tax

If you have avoided tax planning until the last moment of the past financial year, you better start your financial year with tax planning. Saving your taxes better by investing under Section 80C right in April and not wait till your HR asks you to furnish investment proofs is a habit you’ll need to inculcate.

While most salaried people are aware of how they can save taxes by investing Rs 1.5 lakh in the options provided under Section 80C,  you must also explore ways of saving taxes under Sections 80CCC, 80CCD (1b) & 80D.

These can get you additional deductions via investment options like additional deduction of Rs 50,000 is allowed for amount deposited to NPS account under Section 80CCD (1b). Contributions to Atal Pension Yojana are also eligible for deduction under this section.

Don’t procrastinate

Human nature prompts us to first do things which are urgent while we keep procrastinating important things till they become urgent. Why not do things differently this financial year?

Make an effort to start walking towards the goal of financial freedom with these key steps in mind.