It’s time for the yearly cleanup

Debt management, tax planning, investment options, budget repositioning, insurance review and reward point redemption are some of the aspects you should consider looking at before the current year ends.

While some people might want to wait until the beg-inning of the next financial year to clean up their finances, it is always good to start putting things in place when you have a few months in hand. With holidays around the corner, just like your household, your finances need regular cleaning and toning up as well.

Debt management, tax planning, investment options, budget repositioning, insurance review and reward point redemption are some of the aspects you should consider looking at before the current year ends. Whether you have gone way out of your budget or haven’t been able to meet your investment goals, here are a few ways to clean up your finances efficiently.

Debt cleaning
If you have loans and borrowings to pay off which you may not have been able to handle this year, check on the current status and reset your goals. It is important that you assess what stopped you from clearing off your debt in order to identify areas which might need some work. If you have plans to take other loans in the next year, try to minimise your outstanding balance as much as possible using the time you have in hand. In case you are wondering where to start, you might want to pick the loan with the highest interest rate.

Balance credit use
Credit cards are tricky and they require smart planning to draw maximum benefits. And, by that we don’t just mean making best use of your credit reward points and offers, but also maintaining a strong credit score to improve your chances of taking loans from banks in future. It is important that you keep the credit utilisation ratio low for each credit card you hold, so make sure you plan your spending accordingly.

If you have an outstanding EMI on a credit card, clear it off before the billing date, so that you do not have a lopsided balance sheet in the coming year.

Investment target
If you haven’t been able to meet your investment target, fret not, as you still have a few months to buckle up. However, do try to accomplish your investment goals before the year ends. To start with, revisit the investment target you had set and figure out the deficit.

With the holiday season around the corner, instead of indulging in impulsive shopping, sketch out a budget to meet your investment needs. Check if any old investments that would have attained maturity recently can be used for re-investment.

Clean tax liability
People often wait until the end of a financial year to assess their income tax liability for the year and end up losing out due to lack of time. We suggest you take time out now to invest in tax savings instruments and tweak deductions to become eligible for tax benefits.

A few more tips
Make sure you pay off your insurance premiums within the permissible time limit and do not stretch it over to the next year. In case of health and car insurance products, if you fail to pay the premium within the stipulated period of time, you lose out on the NCB benefit.

Use your credit/debit cards wisely in order to earn reward points, cash backs and gift vouchers to maximise benefits. Also, make sure you use them up before they lose validity.

Sometimes you get added benefits on accumulating certain target points within a year, so try and access such benefits by making up for the shortfall if any.

Before the year ends, take a look at your CIBIL report and analyse the score. This would help you clear the mess and take corrective measures to plan your debt and investment for the next year.

Financial cleaning is a regular process and it requires consistent vigilance throughout the year. In case you go off track from your plan, make sure you take the required corrective measures before you step into a new financial year to avoid long-term disruptions.

You can also consult a financial expert for further insight related to issues such as tax matters, investments and debt management.