Planning Finances for 2021
Many people make resolutions for the New Year. But making resolutions can never help until you are determined. Most of the resolutions made are related to improving ourselves in the coming days. However, resolutions are not restricted to any specific field and can be related to one’s personal, professional or financial life. So, in this article, we will be discussing the financial habits that one needs to implement in 2021 to improve your financial health for the future.
Well, any improvement doesn’t happen overnight and it’s important to set goals in terms to achieve them. And a financial plan including short term and long term goals always helps one to achieve financial success. But in order to achieve it without any failure, we will suggest starting with short-term goals in the beginning. This all can be started with planning your finances for one year say 2021, start with a target for January, try to achieve that, and then move ahead with a plan for Feb and March. This is suggested because taking baby steps will always protect you from major failures. On the same hand achieving the first goal will motivate you for your next target.
Financial planning can vary from individual to individual on the basis of income and individual goals. However, if you only consider tax-saving we will suggest you move to the next level and plan your finances for the future as well. If you are not well informed a financial adviser can help you with for a full-proof plan for your investments and tax savings. Once you start following your plan strictly, your financial health will be on the right track.
Remember, your financial planning helps you to make the best financial choices and set a better financial life for you.
Reviewing What You Spent in 2020
- Analyzing how much you spent each month?
- Analyzing your expenditures on necessities, and your wants.
- Know which of your expenditures were unnecessary?
- Where do you overspend?
- Where you were supposed to spend but you didn’t?
- Where you could have saved?
- Analyzing last year’s investment and approximate return from them.
Set Short Term & Flexible Goals
Short term goals are more likely to get accomplished as compared to that of a long term goal. You just have to be clear about your goals and should have a proper plan to accomplish them in a pre-set time frame. But you don’t need to be too hard on yourself to accomplish them, and that’s the reason we are suggesting you set a flexible goal. One year is a long time to make progress toward your financial goals. Hence your planning can be targeted for a month or two, seeing the success of the first plan, onwards plan can be made.
Spend to Save
Whether you are self-employed or a salaried individual, you should try spending some money to save from your taxable amount.
As per section 80C of the income tax act, one can save up to ₹1.5 lakh from their taxable income. But, only a few know that there are still more from where you can save, for example, if you are a home loan holder you can save under section 24 also. However, to avail of this exemption, you need to invest your money under some particular categories which include FD’s PPF, savings schemes under post office etc. Doing this not only saves some from your taxes but also gives you return in the future. So, have a plan along with a strategy so that you won’t regret it in the future.
Organize Your Debts
This should be on your top priority while planning your finances. We as a whole realize that we’re in an ideal situation without realizing the seriousness of debt. Debts are financial obligations which not only eat up your hard-earned money but also cause stress and tension when not managed properly. So, while planning your finances for the coming year you have to be extra careful. Try to repay your higher interest debt as early as possible as a higher interest consumes most of the money. If not this be clear with your preferences, like which debt is on priority to be cleared first.
For example- If you are planning your finances for 2021, and have credit card bills, a car loan, a personal loan, and a home loan. In this case, you first need to decide your priorities. In the ideal situation, your preference should be to clear your credit card bills followed by personal loans first at first. This is because these loans have a higher interest rate. Well, this doesn’t mean you can default on a car loan and home loan. You need to continue paying EMIs for all loans and try to pre-pay your personal loan and close your credit card to save money on the interest component. Once you are done with this, then comes the car loan and at last home loan. Remember your debts can lead to debt traps if not managed properly.
Save for the Future
While you are considering the above-mentioned points, it is equally important to build retirement funds and contribute to investment portfolios. There are numerous money related guides available online, try to go through them and understand the importance of investing. It is always suggested to place 15 per cent of your gross pay into retirement every year. In any case, on the off chance that you have explicit retirement objectives, you may need to expand this sum.
In case you are not sure about any investment or have any money related issue then contact experts for help.
- There’s a lot you can do to improve your financial health in one year, Take one step at a time.
- Remember you can’t do everything perfectly at once.
- Don’t lose hope, as there is always a light at the end of the tunnel, and consistent efforts always are guaranteed to bring results sooner or later.