5 Financial Resolutions for New Year
The year 2020 has just started, and probably you have made your new year resolutions. But have you decided on financial resolutions for the new year to improve your financial habit and create wealth? Your financial resolutions should be more prudent and long term in nature.
Here are five financial resolutions you must not miss to pledge for the new year and life ahead:
A regular and systematic investing approach to achieve your financial goals will help to lay a strong foundation to your financial plan. To automate your investments, you can register a Systematic Investment Plan (SIP) and invest periodically in equity mutual fund scheme/s. Further, regular investments will help you to average your cost of investments and eliminate behavioural bias in volatile markets.
2.Planning for tax savings
ELSS is one of the best investment options that offer tax benefits under Section 80C of the Income Tax Act. The historical data across the ELSS category throws an exciting insight into the tax planning approach by the taxpayers. As per the data available on AMFI (Association of Mutual Funds in India) website for the last three years, the ELSS inflows in January to March quarter have been outnumbering the inflows in any of the other three quarters. As such, it can be concluded that the investors show a tendency to defer their tax-saving investments to the last quarter. Such accumulation of investing plans strains the finances during the last quarter.
As such, you must initiate the tax planning at the beginning of the year and spread the investments across the year. You can register a SIP in an ELSS fund, and the SIP amount can be calculated by dividing the targeted amount by the periodic frequency of the SIP.
3.Creating an emergency fund
It is a prudent financial strategy to keep an emergency corpus fund of at least six months’ expenses. Maintaining such an emergency fund is vital to stay prepared for financial contingencies, if any. If you do not have sufficient emergency fund, make sure you steadily move towards creating such a corpus in the coming year. You may invest such corpus fund in liquid funds, which provide better liquidity and potential of higher returns as compared to the bank savings account.
4.Strive to stay debt-free
The millennials generally tend to emphasize living in the present, instead of saving enough for the future. They do not hesitate to spend on latest electronic gadgets, vacations, etc. even when it may mean making such spends on credit. However, loans and credit card EMIs tend to add to the monthly expenses in the form of interest cost and further eat into the monthly disposable income. It would help if you resolved to stay debt-free to the extent possible, especially for consumption expenditure. You must also make a comparative analysis of your loans and investments.
5.Keep your financial resolutions
This is the most important resolution you must make, as the new year resolutions are generally short-lived. While making prudent financial resolutions is good, staying committed to such resolutions is more critical. Make sure you are not one of those who make new year resolutions for just a day.
With the financial tips for the new year outlined above, make sure you stay on track of your financial plans across the year and even beyond. Happy Investing in the New Year.
Disclaimers: The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her or their own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws/finance bill 2017. Any action taken by you on the basis of the information contained herein is not intended as on offer or solicitation for the purchase and sales of any schemes of UTI mutual Fund. Please read the full details provided in SID and SIA carefully before taking any decision.
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