Why Personal Financial Review Is Essential & How You Should Do It (2019)

It’s the first month of the year 2019, and the time to plan for the year. The first step of planning is reviewing your current situation. I always recommend everybody to review the key areas of life once a year. Whether it’s annual health check-up or annual personal financial review, it must be done regularly. We must reflect on our actions. We should know what went right and what needs improvement. In this article, I am going to share why you must do the personal financial review and How to do it in 2019 – The right way.

Steps To Do Personal Financial Review This New Year

#1 Deposit Tax Saving Proofs to HR Department

Depositing investment proofs to your HR is important to avoid salary cut in the subsequent months. Below is a list of some of the proofs which you have to collate.

• Collate current financial year receipts of all your life insurance and health insurance premium. Also, collate the receipts of the previous financial year which are due for payment until March this year.
• Ask your landlord for the rent receipt. PAN of the landlord is mandatory for annual rent above Rs. 1 lac. So, you may have to ask that depending on your rent.
• Update your Public Provident Fund (PPF) passbook with entries of the current financial year.
• Collect Provisional certificate of your Home loan from your bank. It will tell you the interest amount and the principal amount which is expected to be paid in the current financial year.
• There are a lot of provisions in the Income Tax Act, which help you save tax. Check the guidelines provided by your HR department and collect other applicable documents such as tuition fees receipt, telephone bill reimbursement, medical bill reimbursements, etc.
• Calculate your expenses and fill the form provided by your HR and submit the same timely.

Don’t worry even if you have missed something. You can get everything at the right place at the time of filing your income tax return (ITR).

#2 Saving for 80 C of Income Tax Act

While doing the above exercise, you can also check if you have achieved your 80C requirements for the current financial year. If not, check the options where you can invest and do the investments timely. Last minute investments in March end may place you in a low return vehicle.

There are many instruments which you can explore while doing your personal financial review 2018. Some of them are Public Provident Fund (PPF), the Principal amount paid under Home Loan, National Pension Scheme, Tax Saving Mutual Funds called as Equity Lined Saving Scheme (ELSS) and Life Insurance policies. (Check ELSS funds performance on www.moneycontrol.com or www.valueresearchonline.com; Check Life Insurance policies comparison on www.policybazaar.com or www.bankbazaarinsurance.com)

#3 Making Financial Plans

A New year is the best time for your financial planning as you can align your tax saving investments with your long-term goals. Make your goals now and give a timeline and monetary value to that. Apply an annual inflation rate to this and increase the target amount accordingly.

For e.g. – One of the financial goals is retirement. Suppose you are 30 years old and your monthly expenses are Rs 30,000. If you are expecting your retirement at 60 years and life expectancy as 85 years, then in the coming 30 years (between age 30 and 60), you need to save for next 25 years (between age 60 and 85) also. Assuming an inflation rate of 6%, you would need Rs 1.72 lacs monthly when you are 60 years old (used compound interest formula available in mobile app ‘Financial Calculators’). Keep applying the inflation over it, and you can calculate the total fund required for 25 years.

Your personal financial review helps you decide your investment options. You may also like article on personal financial planning and analysis https://terratale.com/personal-financial-planning-analysis/

#4 Monthly Savings

One of the essential steps in your financial review is to make a monthly investment plan and decide how you will achieve your financial goals. Choose an excellent financial instrument like Mutual fund and invest regularly in it through Systematic Investment Plan (SIP). Don’t wait for the market to correct or come down.

For long-term investments, the market is always correct. You can start your SIPs for long-term goals by investing in some balanced funds (Balanced Funds invest in a mix of equity and debt instruments. Equity part invests in stocks and debt part invests in fixed income investments like bonds.

Balanced funds generally give moderate return with moderate risk) like HDFC Balanced Fund or ICICI Pru Balanced Fund. As you start understanding the market, you can move to equity mutual funds which are risky but offer a good return. Always check the fund performance and peer review comparison in www.moneycontrol.com or www.valueresearchonline.com.

#5 Annual Review

Make a record of your earlier investments and review if they are performing as expected. If they are not functioning right, shift to the right ones. You need to check if the Sum Insured of your life insurance and health insurance policies are sufficient or not.  An annual personal financial review helps you to come back on the track.

#6 Assigning a Nominee

While doing the annual assessment of your investment documents, don’t forget to check the nomination details. Nominee details available in the investments always help an individual’s family in case of any uncertainty. You can approach the service provider if nominee details need to be updated.

#7 Check Your Debts

List down your loans and credit card bills. It’s good to have credit cards and loans if you are using them wisely. Paying the credit card bills on time and avoiding falling into a debt trap is the strategy to use them. Please note that CIBIL (Credit Information Bureau (India) Limited) is keeping an eye on your credit paying pattern. If you pay your dues timely, CIBIL score will ease your path of taking a loan in future. Make sure, all your pending dues are clear, and you have planned judiciously for other loans. Your personal financial review will not be useful if you are not able to manage your debts.

#8 Make a Budget

You should be clear on what all expenses you make every month or every year. Unnecessary expenses can be traced and reduced. There are many mobile applications available in the mobile play store like Moneyview, ET Money, and Walnut Money Manager. These apps help you to manage your expenses by automatically reading your spending SMS and categorizing them. You can edit the auto entries and can also add your cash spending. New parents can read our article on budgeting.

#9 Tour Planning

If you want to go for a tour during summer holidays of your kids, you need to start planning for the same in advance. You may get discounts if you book flight tickets or hotel earlier. For domestic travel by trains, you need to book tickets in advance. Everybody plans for a holiday trip during summers, and getting a ticket is difficult if you plan late. At present, you can book train tickets as early as four months in advance. The website www.confirmtkt.com is very useful for those who plan the tour when all the confirm seats are gone. If you have got a waitlist ticket, this website tells you the percentage chances of getting the seat confirmed. It also suggests you alternate options like booking tickets from an alternate station to get a confirmed seat.

#10 Make a Calendar

Mark important dates/ months on your yearly calendar. The dates should include annual fees for school, tour plans, property tax/ maintenance bill dates, insurance payment dates, bonus/ increment receiving dates, yearly celebrations (Birthday/ anniversary), etc. This calendar will make you remember the relevant dates. It will be a great help to you when you are doing your personal financial review, planning and analysis next year.

#11 Aadhaar Linking

This year, Government has given 31st March 2018 as the date to link Aadhaar with your various services. Some of the services where you need to link your Aadhaar are PAN, Bank Accounts, Insurance policies, provident fund and Mutual Funds. Check the e-mails and SMS from the service providers and link wherever necessary. If you wish to do these linkages via SMS or Internet, make sure that the phone no. which you have provided in Aadhaar is active. In many services, a One Time Password (OTP) is provided on the linked phone no. and you have to enter the OTP to complete the linkage. If it’s not active, go to an Aadhaar center and get it updated.

• PAN – The same website which you use for filing your annual Income Tax return will help you in linking the Aadhaar with PAN. Log on to the website of Income tax department with your PAN no. and password. In the Profile Settings tab, you can find the link for Aadhaar linkage.
• Banks – You can visit the bank branches for updating your Aadhaar. Banks are also providing this service via internet banking. Do visit your bank website to check it.
• Mutual Funds – Some Mutual Funds are recorded by CAMS and some are recorded by Karvy.
  • To update Aadhaar in your Mutual Funds which are recorded with CAMS, use this link.
  • For those Mutual Funds which are recorded by Karvy, you can use this link.
• Provident Fund – If you have created your Universal Account Number (UAN) profile, you can log on this website and update your Aadhaar no. Once you enter the Aadhaar no., inform the same to your HR department who would need to verify it.

Wrapping It Up

The annual personal financial review is a reminder for you to be Know Your Customer (KYC) norms compliant. Following these simple steps once a year makes things more comfortable when the time comes.

While completing your annual financial review, don’t forget to tell us if you have found anything new to be a part of this checklist. You can also contact us in case you find support in following any of the mentioned steps.