October 14 2020
Failing to plan is planning to fail. The global pandemic has taught us all a valuable lesson of the ages, that there can be unforeseen circumstances that can’t just be a rainy day, but the rainy season of unfortunate events that can be capable of derailing or breaking your life.
At such times, just having an annual financial plan just doesn’t work; you need to have an Ideal Financial Plan.
An Ideal Financial Planner is the immunity booster to your financial health. Not only does it help you manage your short term and long-term financial situation, but also help you make sound financial decisions on your goals, and determine the methods to achieve them.
Creating an ideal financial plan includes taking into consideration all your assets (how much you get paid, what’s in your savings and checking accounts, how much is in your retirement fund), as well as your liabilities, including loans, credit cards, and other personal debts.
Now that your resolve to make a debt plan is strong, here are some key highlights that you need to include as a part of your financial inventory
Review Your Investments
It’s important for investors to take stock of where their investments are during the annual financial planning process. This is especially true when the economy undergoes a shift, as is happening now.
Increase Your Contribution to Ongoing Investments
Proportionally increase your contribution towards your long-term investments so that the inflation rate doesn’t catch up with you and your money starts making money for you. For instance, if currently, you are contributing 20% of your income towards investments, consider making it 25% to 30% depending on your family requirements. Let your increments become your investment in due course.
Pay off your credit card debt
If you have any outstanding credit card debt, make it your first priority to pay that off. Interest rates charged by credit cards are exorbitant and can go up to 40-50% per annum (compared to 15% for a personal loan). It is even worth borrowing some amount from your friend or parents and pay off your credit card debt immediately and then slowly return them the money from your savings
Max out your tax-saving investments
Every year you can invest up to Rs 1.5 lakh in certain tax savings instruments like PPF, Tax Saver FDs, Tax Saver Mutual Funds etc which is tax-exempt under section 80C. Make sure you are maxing out on these. Consult your financial advisor on which 80C investments to make as per your risk profile.