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BW Businessworld

Your Mid Financial Year Personal Finance Checklist

Owning many credit cards creates an illusion of wealth, when actually, overusing them would end up causing you to leverage your finances and drag you down

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The first half of FY 2017-18 is nearly over in a blink of an eye! Tick off this six-point personal finance checklist over the next six weeks, and you’ll be on solid ground for the rest of the fiscal year.

Have you paid off pending credit card debt?

The revolving cycle of credit card debt is a pernicious little trap. Owning many credit cards creates an illusion of wealth, when actually, overusing them would end up causing you to leverage your finances and drag you down. Interest rates on credit card debt range from 35 per cent to 40 per cent per annum, and your interest free period gets revoked if you carry forward any outstanding payments. Even if it means buckling down and going on a ‘fiscal fast’ for a few months, it would be a wise move for you to obliterate all pending credit card debt before you step into HY 2018.

Have you planned your Section 80C & Section 80D deductions in advance?

Use the next six months to have a solid plan in place for your Section 80C and 80D deductions. Waiting until March will put undue pressure on your finances and likely lead you to make unwise investments, at the behest of your friendly neighbourhood life insurance agent! Divide your 80C deficit into six (after accounting for deductions from your home loan EMI principal, children’s tuition fees and other ongoing investments such as PPF) and start a 6-month SIP into an ELSS (Equity Linked Savings Scheme) instead. If your Health Insurance premiums fall short of the upper limit of Rs 25,000 (for non-senior citizens), go in for an executive health check-up – you can deduct up to Rs 5,000 per annum from the costs under Section 80D as well.

Have you started planning for your retirement?

Each passing year reduces your chances of retiring with a large enough retirement corpus to see you through your non-earning years. Though you may be young, and your retirement many years away, you need to start planning for this critical goal. A number of complex dynamics are influencing the need for having a solid retirement plan in place, and forward-thinking savers are taking steps to safeguard their financial futures. Noteworthy point: retirement planning doesn’t entail blindly going out and purchasing an annuity plan. Sit with a Financial Planner and arrive at a target amount and a robust, sustainable savings plan.

Have you covered all your risks adequately?

Protection forms the very basis of a solid Financial Plan. As you move into the second half of the Financial Year, make sure you’ve got all your bases covered from the insurance standpoint – the very concept of insurable risks is that they are unpredictable in nature, and can potentially derail your best laid plans if they materialise. Evaluate your need for health insurance, critical illness coverage and personal accident insurance. Ensure that you safeguard your dependents by having term coverage that’s equal to at least 10 times your net annual income.

Have you stepped up your monthly investments by at least 10 per cent?

If you’ve got some of your monthly savings running on auto-pilot (through Mutual Fund SIP’s, for instance), it’s vital to step them up once a year. If you’ve just started out with your savings, and your base is small, you can actually do a lot more than step it up by 10 per cent, until you reach a respectable figure that’s in the range of Rs 40,000 to Rs 50,000 per month. Post that, even a 10 per cent annual step up can make a huge difference to your wealth creation over the long term. Make sure you step up your monthly savings by a respectable percentage before the first half of the year is through.