Financial planning for the new fiscal year

Most of us aim to start each year with resolutions. We challenge ourselves to become better than before by inculcating good habits in our lives. Every new year, we make a few promises to ourselves. However, we do not celebrate the start of the fiscal year with as much enthusiasm. Let’s dive into the fiscal meaning and importance of creating a budget in 2024.

A fiscal year, sometimes called a financial year, follows a different period of 12 months than the regular calendar. Governments, businesses and organisations use a fiscal year for financial tracking and reporting purposes.

Most Indians use the terms fiscal year and financial year interchangeably. However, there is a distinction between them. In India, the financial year is from 1st April to 31st March. The government uses the financial year for taxation, income reporting, and other compliance purposes.

Each company or organisation can decide on their fiscal year period. A fiscal year is more flexible and can align with an organisation’s budgeting and operational needs. 

The financial and fiscal year is the same for individuals. We must plan our budgets from April to March to maximise our tax savings. Once you understand the fiscal year meaning, you can plan your finances for the current financial year

Before creating an annual financial plan, you must understand the basics. Let’s explore the importance of a budget. Budget planning is a bit like creating a roadmap for your finances. Before heading off on a road trip, you check all available routes, decide on the best one, plan your stops, and pack for emergencies. Budget planning is similar. It involves two crucial steps.

Creating a budget requires you to understand how much you earn and spend monthly. You can use a notebook, spreadsheet or smartphone application to help you record the information.

Once you understand how much you earn, you can create a plan to spend your money. Start by setting aside funds for essentials like rent, groceries, utilities, insurance, and transportation. Then, put money away in your investments and emergency fund. Finally, allocate some amount for your luxuries, such as entertainment, hobbies, and holidays.

Budget planning helps with the following:

By understanding your income and expenses, you can make informed decisions about how to spend your money.

From saving for a down payment on a house to paying for a dream vacation and building a mass for retirement, a budget helps you prioritise your goals and allocate funds accordingly.

Planning your spending makes you less likely to overspend and use loans or credit cards.

Creating a financial plan for a whole year can seem intimidating. Now that you’ve mastered the basics, here’s a quick overview of how to create a plan for the fiscal year.

Understanding your finances goes beyond tracking income and expenses. You must also list your assets, ascertain their value, and understand your debts. Doing this will give you a comprehensive overview of your assets against your liabilities.

List all the things you hope to achieve in the future. Prioritise your goals as either short-term, mid-term or long-term. Ideally, your short-term goals are things you can achieve within three years. Common goals include saving for a vacation, making a down payment on a vehicle, and building an emergency fund. Mid-term goals often need four to seven years of planning. You could focus on building an education fund for your child or creating a mass amount to purchase a home. Finally, long-term goals take more than seven years of planning. Retirement is the most crucial long-term financial goal.

You’ve already tracked your income and expenses. Now, figure out how to prudently allocate funds to achieve your goals. Some people follow the 50-30-20 allocation rule for their budget. They use 50% of their income on needs, 30% on wants, and 20% on savings and debt repayment. However, everybody needs to customise the plan based on their liabilities and goals.

On-going debt payments, especially high-interest ones, can drain your income. Focus on repaying debts quickly, starting with high-interest ones first. Once you clear your liabilities, work on staying debt-free.

Investing makes your money work for you. Evaluate investment options and consider those that meet your risk appetite while helping you fulfil your goals. You can identify investment options offering tax savings under various sections of the Income Tax Act of 1961.

Even the best plans can go off-center. A medical emergency or accident could leave you struggling with vehicle repair costs and high hospital bills. Insurance plans provide a financial safety net to rely on during difficult times. Motor insurance helps look after the cost of repairing your vehicle after an accident or calamity. Most policies offer financial help to replace stolen cars and bikes and those damaged beyond repair. Health insurance policies look after your medical bills, empowering you to focus on your health and recovery instead of worrying about your finances. Additionally, you can claim deductions from your taxable income against the amount you pay for your health insurance premium.

Your income, liabilities and goals can change. Ensure you review your financial plan and investments regularly. Adjust it as required to stay on track to achieve your aspirations.

Planning for the fiscal year empowers you to manage your expenses, save for future goals and maximise tax-saving investments. Now that you know how to budget for the year, you can work on creating a sound financial plan for the current fiscal year. Ensure you evaluate all insurance and investment options to find the ideal fit for your future needs. Visit the Zuno website today to browse our policies and get started on your fiscal plan for the year. 

ARN: Zuno/Blog/Financial planning for fiscal year/07/24/03.

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