ARTICLES

Come April and the festival of Baisakhi would be celebrated by Hindus and Sikhs alike. Baisakhi is an auspicious festival that marks the start of the new season. Besides Baisakhi, April is also the time when the new financial year sets in. Just like you make resolutions when the New Year kicks in, you can make financial resolutions when the financial year sets in.

Wondering why?

The answer is pretty simple. Resolutions are promises that you make to yourself; promises that help you right your wrongs and head in the right direction. While new year resolutions help you change different aspects of your lifestyle, financial resolutions can help you make changes to your finances. Moreover, when you make your financial resolutions at the start of the year, you can slowly change your financial habits.

As you have time on your hands, you can start slow and then learn to adapt to the new habits. When good financial practices become a habit, you can become financially healthy. 

So, after all, being said, here are 5 useful financial resolutions that you can make at the start of the new financial year 2022-23 – 

Tax planning

Yes, the financial year is just beginning but it is better to plan your taxes ahead rather than the last-minute planning. Here are some reasons why –

• If you are salaried, you need to declare your tax-saving investments and expenses to your employer for the purpose of TDS deductions,

• You can assess your financial needs and then invest in suitable avenues,

• If you make a mistake, you would have time on your die to rectify them,

• You can plan your taxes effectively when you have time to check out the available tax-saving options offered by the Income Tax Act of 1961.

Pro Tip: So, don’t leave tax planning for next March. Start now. Pick the tax-saving avenues and invest in them for your financial goals so that when it is time to file your returns, you can avoid last-minute mistakes.

Debt management

Make a resolution to tackle your debts effectively so that they do not become an additional constraint on your finances. If you use a credit card, pay off its bills, on time and in full every month. Defaulting on your credit card bills is a double whammy. Firstly, you attract high-interest rates and secondly your credit score is hampered. So, clear your credit card dues in full and within the due date. Click here to read more about The Credit score.

Lastly, if you have a home loan, use it to claim tax exemptions. The principal paid towards the loan allows you to deduct under 80C and interest is paid as an exemption under Section 24 (b) and Section 80EEA. Use these tax-saving sections fully for maximum tax savings.

Pro Tip: Weed out all types of high-interest loans that you might have like personal loans, gold loans, loans against securities, etc. Pay off these loans as soon as possible to reduce the interest expenses. 

Budgeting

Pledge to budget your incomes and expenses at the start of every month. A well-planned budget would give you a clear idea of your finances and also help in limiting overspending. Prepare a budget listing down all possible sources of income on one side and the expected monthly expenses on the other. Deduct the expenses from the income to get the disposable income that you can invest towards your goals. 

Pro Tip: Try to stick to your budget and cut down on any unnecessary spending to save more. 

Investing in the PPF scheme

The Public Provident Fund is a Government-administered long-term scheme that can help you create a good corpus for your financial goals. The PPF scheme has triple tax benefits. The investment done in the scheme allows you a deduction under Section 80C up to Rs.1.5 lakhs. The interest earned on your deposits is tax-free and the amount that you get on maturity is also tax-free in your hands. 

PPF earns an agreeable rate of interest making your savings immune to market volatility. Moreover, the scheme requires annual contributions thus motivating you to save regularly to create a corpus for your goals.

Pro Tip: If you don’t have a PPF account, open one with your bank or a post office. If, on the other hand, you do have an account to your name, ensure that it remains active by contributing every year. 

Learning from your mistakes

Lastly, make a resolution to learn from the financial mistakes that you might have made in the past. To err is human but to keep repeating them is downright foolhardy. So, ponder over the financial mistakes that you might have made in the previous years and learn your lesson. 

Pro Tip: Start the new financial year with more knowledge and awareness and steer clear of the common pitfalls that you might encounter in your financial journey. 

It is said that a good beginning is half done. So, start this financial new year on a positive note by taking the aforementioned resolutions. These resolutions are aimed at making you a pro at handling your finances and also to help you achieve your goals. So take a pledge to follow these resolutions so that when the next financial year draws to a close, you would be better off than the year before.