As we stand on the brink of 2023, it is crucial to take stock of the pending financial tasks and complete them to make way for the new ones in the New Year.
Explains Neeraj Chauhan, CEO of The Financial Mall, a financial planning firm: “With the end of the previous year, one should evaluate how the year has been for them. The first thing to do is to review the portfolio and make changes accordingly. The second important task is to update will/nominations/bank details and look for capital gains to plan tax payments and tax harvesting.”
Here are five tasks that we must complete before the New Year rings in:
Review Your Goals
While fixing goals before you start your investment journey is the key, over time, your priorities may change, or you may rethink the timelines of the plans, or your risk appetite is different from before because of certain circumstances. Take time to assess all these changes and review all your goals. Some changes may warrant major changes in your financial planning.
Review Your Investments
While investing for the long term is the key to wealth creation, it doesn’t mean you should invest and forget. This is especially true in case some or more of your goals change.
Once that happens, you may need to relook at your asset allocation. “For example, in 2022, gold and credit risk funds have outperformed versus international equities, and small-cap have underperformed. So accordingly, allocation in your portfolio would have changed due to mark-to-market gains and losses. So now it is the best time to bring your asset allocation to your original decided ratio,” says Anant Ladha, founder of Invest Aaj For Kal, a financial planning firm.
This exercise will also help you throw out underperforming instruments.
Check Life Insurance Needs And Claim Refunds
Your responsibilities increase significantly with life events such as marriage, becoming a parent, buying a house, etc. You must ensure that your life cover is sufficient to cover all these additional responsibilities. Always ensure that you have adequate health insurance and term insurance in place. Also, in many health insurances, you get an annual refund for check-ups; ensure that you submit your bills on time and take proper claims.
Plan For Taxes In Advance
Usually, we leave tax planning for the last moment, and sometimes due to limited time, we make a wrong decision in a hurry. The best is to plan for your taxes and investment related to taxes systematically in advance. If you plan early, you have enough time to calculate how much you need to invest to save the maximum tax deduction possible and evaluate all options available.
Also, if, for 80C deductions, you plan to invest in ELSS mutual funds, you can do it in a more efficient SIP format if you plan earlier.
Review Your Last year’s Financial Behaviour & Decisions
Ideally, you should also check your deviations from last year’s budget. This way, you can ensure proper allocation of your money and re-discipline yourself, if required. Also, assess your mistakes in your investments and savings patterns during the year. “It is important to note down your investment performance and check if you made any emotional mistakes. For example, suppose your portfolio has underperformed for a year because markets have corrected or underperformed. In that case, you need not worry about it, but if the underperformance is due to your emotional mistakes, you must make a note of it and try to improve it in the future,” adds Ladha.