This is the best time of the year. The weather is good. The wedding and party scene picks up. Soon it will be Christmas and New Year. But getting lax in your money matters could leave you with a hefty price tag next year.
Here are some finance tips to keep in mind now that the year is coming to an end.
1. Don't plunge into debt
The biggest mistake you can make is to go overboard and start the next year clearing your debt.
You may want to gift yourself a home theatre or your spouse a diamond ring, but can you really afford it? Sure, you don't need to have the money. You can just whip out your credit card and decide to pay it back over the coming months.
Please don't give in to temptation. If you can't afford it, just hang on.
This does not just refer to expensive or mindless purchases. It also refers to shopping for clothes and accessories. Be careful how you use your credit card.
2. Do your tax planning
Never leave your tax planning for the last two months of the financial year. Incidentally, the financial year is from April 1 to March 31. If you have not exhausted your Section 80C limit of Rs 1,00,000, get cracking.
You can invest in the Public Provident Fund or National Savings Certificate.
If you want to invest in a tax saving fund, break it up over the next few months. Let's say you want to invest Rs 20,000 in a tax-saving fund. Invest Rs 5,000 each in December, January, February and March.
Of course, the ideal option would be to invest fixed amounts every month over the entire year. Even if you have not, enter the market gradually. Should the market fall due to a correction or drop slightly, you will benefit.
3. Clean up your portfolio
Take a good, hard look at your portfolio. Have any stocks you wished you had never bought? Any stocks you blindly bought on some tip but are doing badly now? Any that you want to get rid of?
This is not an exercise to make you feel low. Act on this. Now is the time to get rid of them. People tend to have an aversion to selling stocks, hoping they will soon turn the bend. Ask yourself why you bought a particular stock and if that rationale is still valid. Don't carry all these dead investments into the new year.
If you do sell and have some spare cash, you could try looking at some fixed return investments. Now, banks too are giving fairly good interest rates on fixed deposits. If you want to get into the market, consider a Systematic Investment Plan of a mutual fund. This will entail investing fixed amounts every month for at least a year. There is no saying where the market is heading and if a correction is around the corner. Don't try and time the market. Be consistent instead.
4. Settle your dues
If you are carrying some amount of debt, maybe you should look at paying it off. If you have a credit card load on which you are paying 2.5% per month (which is 30% a year), it would make sense to break a fixed deposit to pay it off. You will never get 30% on a fixed return investment. So, instead of earning 8%, just clear up your 30% debt.
Of course, if it is a long-term loan like a housing loan, then you have no choice. If you do have a choice, try and move into the next year debt-free.
Even if you owe a friend or relative some money that was given to you interest free, you should consider paying back at least a part of it, if not the entire amount.
5. Tie up the loose ends
Any reimbursements you are entitled to from the company but have not claimed?
Switched jobs but not transferred or claimed your provident fund? Finish it all off this month.
Not applied for a PAN? Get cracking.
Always wanted to open a demat and a broking account but were too lazy? Work on it now.
Start the next year without all these hangovers of the past.
Value Research is a mutual fund research organisation.
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