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How to Sort Your Finances in the New Financial Year

Money management is a key part of life, and getting your finances in order becomes even more crucial at the start of a new financial year. If you're looking for tips on how to manage your finances in 2023-24, this guide will help you get started.

Personal Finance is Individual

Personal financial planning refers to the steps you take to better manage your money. It involves generating income, controlling spending, managing savings, segregating expenses, and making smart investments, among other things.

In simpler terms, personal finance is about budgeting wisely. It’s an ongoing process that plays a role in achieving both short-term and long-term financial goals.

Why Personal Finance Management is Important

When you plan your finances properly, you can avoid the burden of unexpected expenses. Planning ahead also helps you meet your long-term financial objectives.

Small expenses are easy to overlook, but if left unchecked, they can accumulate into a significant financial burden. Beyond managing expenses, it's essential to plan your savings and investments to ensure financial security for yourself and your family.

How to Manage Your Finances More Effectively

Before making plans for expenses and investments, it's essential to organize your income sources and calculate your total earnings. Once that's done, you can start the actual financial planning process. Here are five key areas to focus on:

1. Tax Planning and Declaration

If you're required to pay income tax, there are several strategies to reduce your tax liability. This includes making tax-saving investments, claiming exemptions, and making timely tax payments. If tax planning seems overwhelming, consider consulting a tax advisor.

2. Savings Plan

There’s a small but significant difference between savings and investments. Savings refer to the surplus cash you set aside for future needs. However, holding too much in savings can limit potential returns. A financial advisor can guide you on how to invest your savings wisely.

3. Investment Plan

Choosing the right investment depends on your financial goals. Many people invest to generate income, with popular options including stocks, debentures, fixed deposits, and mutual funds. Remember, all investments come with risks, so it's important to consult an advisor before making decisions.

4. Insurance Plans

Insurance provides financial protection against unforeseen circumstances such as illness or the untimely death of an income earner. Term life insurance can secure your family’s future, while health insurance helps cover medical costs. Vehicle insurance is also essential for personal protection and is legally required.

5. Managing Expenses

No financial plan is complete without proper expense management. Fixed costs like rent and EMIs, as well as variable expenses like shopping and travel, all need to be accounted for. Following basic budgeting rules can help you stay on top of your finances.

Takeaway

When it comes to financial planning, the earlier you start, the better off you’ll be. But even if you haven't started yet, it’s never too late.

Remember, results won’t appear overnight. It may take months to develop the discipline needed for effective financial management. But once you get through the initial phase, managing your finances will become easier, and you'll begin to see positive changes in your bank account.