In just a few days, we will welcome the new year. Planning for what we want to achieve in the coming year is essential, but we must address several financial matters before doing so.
Many of these come with deadlines, such as December 31. Additionally, if we can make financial plans for 2025, we can approach the new year less stressed. Let’s explore the financial topics to focus on this December.
Rebalancing Investments
We may have set financial goals for this year, but fluctuating markets can impact our ability to achieve them.
To realign our investments with these goals, we should review our mutual funds, stocks, and other assets to determine whether they have performed as expected or exceeded our projections.
Income Tax Savings
Now is the perfect time to strategize ways to save on income tax for the upcoming year. You can take advantage of certain exemptions provided by tax law.
Consider how much you can still invest for deductions under Section 80C. Additionally, don’t overlook Section 80D, which can help you save on taxes while securing your family’s health.
Planning your tax payments will help you avoid interest, penalties, and unnecessary stress, particularly when deciding between the new and old tax regimes.
Managing Debt Payments
With the increasing use of credit cards, assessing your debts at the end of the year is crucial. Determine your outstanding balances and the interest that will accrue.
Aim to pay off debts, especially with any bonuses or extra income you receive. If you have home loans, consider early repayment plans, which can help clear debts sooner and reduce overall interest costs.
Planning for Bonuses
When you receive bonuses, allocating them towards initiatives that enhance your financial status rather than frivolous expenses is wise.
For instance, investing in options that offer long-term growth—such as the Public Provident Fund (PPF) and mutual funds—can benefit you financially in the long run and also aid in tax savings.
Reviewing Insurance Policies
Health insurance is vital, especially given the rising costs of medical care. Ensure that your current policy is sufficient. Reassess your coverage to ensure it meets your needs, especially if you are married or have children.
Building an Emergency Fund
Establish an emergency fund to cover your expenses for three to six months. Plan to increase this fund by cutting back on unnecessary expenditures.
Exploring New Investments
New investments should align with your financial objectives. Evaluate any investment options that correlate with your income, such as gold, sovereign gold bonds, or more stable avenues, rather than solely focusing on stocks and mutual funds.
Planning for Major Goals in 2025
A well-defined financial strategy is essential for significant plans like purchasing a new home, funding your children’s education, or going on international trips.
For example, if you require a down payment of Rs. 5 lakhs for a new house, you should aim to save Rs. 20,000 each month. By making financial plans this December, you can approach 2025 with confidence and peace of mind.
Note: The information in this article is intended for your understanding only. It is advisable to consult with your financial advisor before making any significant financial decisions.