As you welcome the new year 2022, it might be a good idea to reflect upon how well you did last year. This also includes the financial aspects – how your investments have fared in the last year and if you are still on track in achieving your financial goals at the deduced time horizon. It’s a good time to revamp your financial planning checklist if needed. In this article, we will cover five items that you must check off in your financial planning list in 2022.
- Prepare a new budget
Every year, an individual must ideally exercise new budget preparation taking their present financial situation and other factors into consideration. One must begin by evaluating their current income levels and their expenses. Reviewing your expenses will help you to monitor your expenses and avoid unnecessary expenses. A simple way to achieve this is by following the 50-30-20 budgeting rule. As per the rule, an individual must ideally allot 50% of their income towards basic necessities such as rent, food, etc. Next, 30% of the income can be used to support one’s lifestyle such as going out for dinner, taking a trip, buying new apparel or furniture for the house, etc. And the remaining 20% must be saved and ideally invested in the right investment options.
- Evaluate your financial objectives
Evaluating your investment goals will help you stay on track with achieving your financial goals – big or small. You must also evaluate if you are on the right path to achieve your retirement and tax saving investment goals as well. You must also review if you have made necessary contributions towards your financial goals such as retirement, child’s higher education or marriage, buying a house, etc.
- Evaluate your cohesive portfolio
A cohesive investment portfolio comprises of different types of investments such as mutual funds, gold, fixed income securities, stocks, real estate, money market instruments, cash and cash equivalents, etc. Next you must work towards aligning your investment portfolio as per your desired asset allocation mix. If needed, rebalance your investment portfolio as well as per your financial needs.
- Clear your debts
It is always a good idea to be financially independent and debt-free. Being debt-free does not add on to your stressful life. You can begin by getting rid of high-interest bearing types of debt such as personal loans or credit card bills. Keep in mind that certain debts such as home loan provide tax benefits to investors. So, you must plan your debt repayment plan in a way that focusses on home loans at the last.
- Maximise tax savings
An individual can avail of several tax saving investments to lower their tax outgo. With different tax saving investment options to choose from – ELSS (equity-linked savings scheme) mutual funds, tax saving fixed deposits (FD), Sukanya samridhi yojana (SSY), public provident fund (PPF), national savings scheme (NSC), senior citizens savings scheme (SCSS), etc. choose a type of investment that aligns with your financial portfolio.