Become money smart this fiscal

Make sure to file your tax returns by 31st March,if you haven’t filed already. Go to http://www.incometaxindiaefiling.gov.in for filing your returns online or contact a tax preparer nearby. For the coming year,starting April 1st,make sure you do your tax planning in advance.

* Use all tax deductions possible to bring your tax liability down

* Declare your HRA,home loan principal and interest contribution,and tax saving investment related details to your employer at the start of the year itself

* Keep all HRA receipts received from your landlord,keep at least 6 months of salary slips and keep a record of previous tax returns

* If you plan to invest in ELSS from mutual funds,start a SIP rather than wait till the end of FY to make lump sum investments. It will average out the risk and reduce financial burden at the end of the year.

Investment Planning

Discuss your long term and short term financial goals with your family and make sure you write them down. Taking inflation in to account will make your future requirement a more realistic figure. For eg,if the current cost of your son’s education is Rs 10 lakh,then assuming an inflation of 7 per cent,the requirement after 10 years would be over Rs 20 lakh.

Look at equity for long term goals and debt for short term (1 to 2 years). If you do not have the expertise or inclination to invest directly in to stocks,you can look at equity diversified mutual funds. CEO,Value Research,Dhirendra Kumar believes,“mutual funds are a good vehicle for equity investments as you have a dedicated fund manager to manage your investment and even with small amounts of money you can invest in several companies through the fund of your choice.” Make a portfolio of 4-5 equity diversified mutual funds with proven track record and consistent performance and review the portfolio from time to time. Equity,as an asset class has given best returns over the longer period. However,discipline to contnue investing and patience for long term is a must for an equity investor.

For debt investment you can look at fixed maturity plans or liquid funds offered by various fund houses. Though the returns are not guaranteed,the post tax returns on debt funds makes them an attractive option as compared with Fixed Deposits.

Along with equity and debt you must have 15 to 20 per cent of your portfolio in gold. You may look at gold exchange traded funds than buying physical gold,for investment purposes. However,you need a demat account for buying a gold exchange traded fund.

Insurance Planning

If you haven’t already bought a life insurance policy,buy one immediately as you would not want your family to suffer,should something happens to you. You may buy life insurance online as that would be 20 to 30 per cent cheaper than bought through an agent. However,avoid looking at any kind of returns from your insurance premiums. Suresh Sadagopan,a Mumbai based Certified Financial Planner suggests,“avoid mixing insurance with investment and buy a term insurance policy which is cheapest form of life insurance available.”

Along with covering your life,a health insurance policy is equally important. This will take care of your hospitalisation expenses,which are becoming expensive day by day.

Remember,insurance is a necessary cost to reduce your risk. Don’t forget to claim tax deductions both on life and health insurance policies. Along with these two,you must look at insuring your household through a household insurance policy. While buying the policy declare value of each product being insured and keep the purchase receipts of each item. Household policy will come handy in case of burglary or fire,not uncommon these days.

Get financial life in order

This is a good time to get your financial life sorted.

* First and foremost start making a written monthly budget and follow it strictly.

* Build a good credit history by making all loan/credit card payments on time.

* Maintain a file of all provident fund,mutual funds,and insurance policy related documents.

Follow the steps above and become money smart. Do not break the resolutions this time and make your financial life free from all worries.

ritukant.ojha@expressindia.com

KEY TAKEAWAYS

* File tax return by 31st March

* Keep record of all tax saving instruments like PF,ELSS etc

* Make sure to be adequately insured. Buy health and life cover immediately

* Identify financial goals and start investing towards them