Year-end Financial Checklist: Are you on track? Find out

The year 2020 has been challenging for many and has helped people realize the importance of having a proper financial plan and investments and savings in place to tide over any unseen crisis. Having said that, at this time of the year, while most of us are busy planning and availing holidays, experts say, this relaxed time is a good opportunity to review some critical personal finance matters. Additionally, looking at a financial plan on an annual basis will help you to stay on track with goals.

In a financial checklist, the first thing every individual must do is create a balance sheet of all their assets. DP Singh, Chief Business Officer, SBI Mutual Fund, says, “The balance sheet must have a detailed account of all the assets that one holds and has invested in. This will also help one keep track of what percentage of his/her assets are liquid and what percentage is illiquid.” Having a balance sheet will help you plan your finances in a more efficient manner and align your goals and assets.

AMFI, Chief Executive, NS Venkatesh, says “A holistic financial plan makes it easier to cover all your needs including retirement planning, tax strategy, protection plans and investing for wealth creation with the help of correct asset allocation based on your risk profile.” He further says, “The year-end is also a good time to sit back and take stock of your goals planned last year and what goals do you foresee in the upcoming year and near future. Identify what needs improvement to optimize your finances in the best way. It is also a good time to get ahead of tax planning.” To help you with your planning, you can also use a financial checklist available online or take the help of a professional to stay on track to achieving your financial goals.

Experts say one should also plan for life events and changes in the forthcoming year that may impact the financial situation in the next year, such as college admission for children, marriage in the family, purchase of a house, etc. Mohit Bhatia, Head – Sales and Marketing of Canara Robeco Mutual Fund, says “To make sure one’s finances are in order, he/she should assess the year-end net worth for the family and check if his/her savings and investments are progressing as per desired financial goals. One should also check and update the list of beneficiaries under various investments, insurance policies, will, etc.”

To further ensure efficiency in meeting financial goals, experts say every individual, irrespective of their age, income profile, risk profile, should have an asset allocation model that broadly defines what assets to invest in and the quantum of exposure to those assets. Singh of SBI Mutual Fund says, “Asset allocation is unique to each individual and should be arrived at taking into account one’s age, income profile and risk profile. But such an asset allocation model should be sacrosanct to the individual at all times.” Having said that, keep in mind the model should be reviewed on a regular basis so that any imbalance induced by market movement can be reset to the appropriate asset allocation mix.

If you want to improve your finances, there are various steps that you can take. For instance, Prateek Mehta, Co-Founder and Chief Business Officer, Prateek Mehta, Scripbox say, “Crisis or no crisis, saving at least 30 per cent of your income regularly (monthly) is a golden thumb rule, and one should save and invest more if possible. Going through a budgeting exercise and distinguishing between needs and wants can help you get there.” Note that you could also start by setting aside your savings bucket before you allocate money to expenses.

Experts say, never be in love with any one particular asset. Singh of SBI Mutual Fund says, “Every asset has its own market cycle and no two assets move in tandem with each other. Market dynamics can change the performance trajectory of an asset, therefore you must also change the asset allocation accordingly, even if it means letting go of a fund or asset that you hold dearly because of its past performance.” Showing excessive and irrational emotional attachment to an asset can be detrimental to your investment portfolio.