How do I write a financial plan for the new year?

“There are far better things ahead than any we leave behind.”

A comforting thought as we welcome another new year. But change has to come from us or it’ll be just another year much like the ones we’ve left behind. Even if we can effect one change, a change for the better of course, the year would be worth it.

We encourage you to make a change to your financial lifestyle this time around. Sometimes simply identifying aspects that need change can make a difference. So ask yourself the following questions:

1. Could I save more?

Let’s tackle the ‘should I’ or ‘would I’ later and focus just on the could I for now. Whether it is every month or as and when you have money, the question you need to ask yourself is whether you could save more in the coming year than you did last year.

2. Do I have money set aside for emergencies?

The thumb rule is to have at least 3 months of your monthly expenses set aside as an emergency fund. Where would you set this aside? In a product that is safe and can be easily liquidated would be the priority. If you can simultaneously earn on such an investment, more power to you.

3. Is my family insured?

The importance of health insurance has been established a millionfold after coronavirus upended our lives two years ago. We cannot stress enough how vital it is to cover your whole family under a good health insurance plan. Being in good health is not a sign that you will remain so forever. It is, however, a good sign to apply for cover now.

4. Is my life insured?

If you are an earning member of your family, and they are dependent on your income, then you should get term life insurance. It is a way of protecting your family’s future and ensuring that they can continue to live the life they are accustomed to even if you are not around.

5. Are my loan EMIs more than 35% of my income?

Another rule of thumb is to keep your monthly debt repayments below 35% of your income. Overleveraging yourself is never a good idea. If you are carrying more debt than you can manage, now is a good time to take stock of your assets and figure out the best solution to reducing your debt commitments.

6. Do I have a will?

The young always think there’s more time for serious issues like creating a will. But life is too unpredictable and dying without a will can be a very serious problem for the heirs you leave behind. Even if it is a first draft of your will, it is better to put it down now than your family facing the consequences of this omission. There are easier, more accessible ways to create your own will today.

These are some of the easy and simple steps you can consider. For those of you who are already on top of these, here are some more questions to ponder:

7. Are my home and other assets covered by insurance?

You can insure any asset that is valuable to you. And assets like home, jewelry, etc. are recommended to be insured so you don’t suffer heavy losses in the event of a disaster.

8. Am I maximizing the tax benefits available to me?

Every financial year you have the opportunity to save tax by investing in specific products that allow tax-saving and also add value to your portfolio. Planning your taxes at the beginning of the year can make a big difference to the way you save tax for the whole year.

9. Am I saving enough for my kids’ higher education? Have I started saving for my retirement?

These are typical long term goals that most people have to consider. If you already have a healthy habit of saving regularly, now would be a good time to see if you are doing enough, or need to do better to meet your long-term goals. If done well, you can ensure that you save towards your long term goals without compromising on your short-term ones.

10. Are nominations updated in all my investments?

Another very important problem to be taken care of. Nominations do not necessarily mean the investment will go to the nominated parties as a will overrides nominations. However, nominating someone will ensure that the transfer from you to the rightful heir can be done more smoothly.

11. Should I get professional help?

If the answer to this question is yes, all of the above questions will be addressed and sorted with support and advice from professionals who know how to get it done. Professional help can be more than just knowledge of products and returns on investments. If done correctly, help can also come in the way of structure, building good habits, and the comfort of knowing that sound advice is just a phone call away.