As we are in a new year, it is only natural to have new
goals to improve your life.
This could be anything from eating healthy, reading more to
even self- care.
It does not harm to consider your financial health too while
you are at it.
After all there is no better time to review your financial health than at the beginning of a new year.
Emergency Funds
The thumb rule is that one should keep an emergency fund
equivalent to 6 months of fixed expenses.
Post covid it is better to stretch that to a minimum of 12
months of fixed expenses, it is always better to have it and not need it than
to need it and not have it.
This could be in a combination of
liquid mutual funds and fixed deposits.
With rising inflation annually, your emergency fund will
need to reflect that with the means of an increased contribution towards your
emergency fund.
If prices are on the rise then so are your fixed expenses,
therefore your emergency fund should also see an increased contribution.
Additional reading: Click Here to read about what the Chinese Bamboo can teach you about equity investing
Start your ELSS investments
Ideally one should not wait till the end of the financial
year for tax saving investments.
The shortage of time usually leads to panic among investors
resulting in uninformed choices.
When
one does an SIP, he/she does not need to time the market (not as if that is
possible).
Using
SIP, one can avail of rupee cost averaging that comes along with it.
If
one uses the Lump Sum route at the last moment then there is a high chance of
panicking due to lack of time which may lead to ill-suited choice of funds.
SIP
is all the more beneficial during a market downtime since you would be
accumulating more units at a lower price. This is not possible when the markets
are at a high and you make a lump sum investment.
When
you divide your SIP’s over a period of 12 months, you open yourself to the
possibility of availing benefits of rupee cost averaging without consideration
for market conditions.
Have
a Retirement Fund
Another
year passes by meaning you are one year closer to your retirement.
When
you retire, you stop working but don’t stop living.
Your
monthly expenses will continue as they were, in fact taking into account
inflation, it will only grow further.
Further
when you consider rising medical inflation & expenses & growing life
expectancy, a retirement fund should be your primary goal when investing if not
a goal you prioritize.
You
are going to grow old, it is not a voluntary choice and your children are not
your retirement fund.
If
you do not have a retirement fund by now then today is a good day to plan
towards it.
Review your
Portfolio
A mutual fund portfolio must be reviewed periodically, ideally
once a year.
This review should be undertaken by a qualified professional or
else it would be a futile exercise.
A periodic review helps to confirm if the goals and your mutual
fund portfolio is still aligned and on track.
This is important because mutual funds could go through several
changes like change in category of fund, restriction in amount, strategy, aum,
etc.
It is not a given that you would need to alter your mutual fund
portfolio due to reasons mentioned but you would need to review if any changes
are warranted.
Increase your
Investments
It is great if you are investing via sips.
With a rise in income do not forget to increase your sip
amount though.
This is important keeping in mind inflation, with a rise in
inflation your sip amount should also see a raise.
If you receive an annual bonus then a portion of that should
diverted towards your investments.
Additional reading: Click Here to read about how Compounding works in mutual funds.
Reduce debt
Debt inherently by its very nature is not always bad.
Good debt refers to any debt that enhances the quality of
your life, instantly or over a period of time.
Bad debt is any debt that can have a negative impact on your
earnings with little to no upside.
Irrespective of the type of debt, it is always a good idea
to reduce the amount no matter the margin.
Not only does this help you financially but also helps you
relax mentally.
For portfolio enquiries, email us with your doubts at info@themutualfundguide.com
