Financial planning is integral for a fulfilling year ahead, with better cash flow management, stronger financial health and a buffer to help you explore the best investment products. To get started, here are 3 financial checks you should run now, for a better 2020.
- Review your tax options
Investing in tax-saving instruments can help you save a small amount of tax. Here are some effective tax-saving options you have:
- PPF: You can invest the entire tax-deductible amount of Rs. 1,50,000 per year in the Public Provident Fund. However, the lengthy lock-in period of 15 years may not work for everyone, especially as you cannot take out your investment before that. And if you do, you may incur an additional penalty.
- Health Insurance: As an effective tax-saving investment instrument, health insurance can help you cater to medical needs and also avail some of the best tax benefits.
- Tax-saving mutual funds: Also known as Equity-Linked Savings Schemes (ELSSs), these give good returns, which are influenced by market forces. There is also a lock-in period of 3 years, which may not work best for investors seeking a short-term investment option.
- Tax-saving Fixed Deposit: Fixed deposits are one of the best investment options that help you earn high returns without compromising on safety. Investing in tax-saving FDs can offer a healthy mix of risk-free investments with good returns. However, you may also want to invest with FDs that offer a higher interest rate, even when they are not tax-saving. This is because of the lucrative interest rates you can get, by investing in these fixed deposits.
- Review your retirement savings plan
You’re never too late or too early, to start preparing for your retirement, especially as the fear of outliving their retirement savings, grapples every retiree. With higher cost of living indices, and rising inflation rates, building a strong retirement corpus is more important than ever. The value of Rs. 10,000 today will have much less value in future. So, look for retirement options that can help you in your sunset years. Some of the options are:
- Pension insurance plans: You can assign a part of your savings to the insurance as it accumulates as a retirement corpus. Look for pension plans that give you a steady cash flow in your post-retirement years. The best ones help you plan your retirement in gradual stages.
- ELSS: You can start this kind of investment early, as it helps you invest in a long-term plan to save for your retirement. But, there can be a temptation to spend the accumulated money before retirement.
- Senior Citizen FDs: These are available at both – banks and non-banking financial companies (NBFCs). These FDs specifically help senior citizens save and invest their money. The money, in turn, earns an interest.
Senior citizen FDs offer better interest rates than normal FDs do. For example, Bajaj Finance FD interest rates for senior citizens are 8.35%, which is higher than those for existing customers. To top it, FDs are risk-free and secure. It also offers flexible tenors and the smallest deposit of Rs. 25,000. You can always check your returns with FD calculator, so you can plan your investment in advance and grow your savings easily.
You can also choose to save with the Systematic Deposit Plan by Bajaj Finance, where you make monthly deposits, starting Rs. 5000. For those seeking safety of returns with steady growth of investment, this is the best savings option.
- Review your investment portfolio and protection plans
Now you know how you can invest your funds in your chosen tax-saving products. You should set aside a corpus for retirement. There is one more aspect left – protection. All that saving and investing will mean nothing if you and your family aren’t well protected. Here’s how you can ensure your protection:
- Term insurance plan: When it comes to protection, a basic term insurance plan will serve you well. It provides a corpus for your family in the tragic event of your death. The earlier you invest the better, as the premium will rise with your age. The premium is also tax-deductible.
- Medical insurance: Medical costs have been rising exponentially. A good medical insurance policy can protect you from spending all your savings in a medical emergency. You can even add riders that will give you extra protection.
Your investment portfolio should be a healthy mix of investment and insurance. You should include tax-saving options and financial investments that help generate wealth. Review your finances from time to time, so that you are not stuck with bad investments or insurance.
