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6 Steps to Financial Fitness

05 Jan 2023

When you are relatively young, you simply feel assessing your financial status is an exercise that can wait. Not many of you realize the plentitude of benefits, the right kind of planning can bring about in your life.Here are 6 easy steps on how you can get into the financial fitness mode. Have a fair idea of the assets and liabilities you own This is the first and the foremost step in Financial Fitness: Getting in shape for the New Year theme. You need to understand how much your assets are worth. Then you go on to calculate your overall liabilities. Assets include the land or the property you own, the car you have, the investments you have made with stocks, shares, bonds, savings, etc. Your insurance policies can be considered to the asset value as you will be entitled to receive a lump-sum upon maturity of the scheme. Liabilities include your mortgage debts, student loans, auto bills, gas and electricity bills, credit card payments, your house rent, etc.   Now you need to add up all the assets and subtract the value of the total liabilities. You then get a fair idea on your credit worthiness or your net worth at the end of the month. Multiply the sum by 12. This is your net worth annually. You need to allocate this sum towards a wise form of investment. Learn to assess your goals You need to categorize your goals into the short-term, medium-term and long-term. Short term goals include paying for your monthly credit card bill. Medium term loan might be the EMI you remit towards your home or housing loan. Long term goals can be your retirement schemes. Assess your goals and allocate a marginal sum of money to meet each of these goals. It might sound a little tedious at the initial stage. But by inculcating the right degree of financial discipline, you will invariably get habituated to it. Are you gearing up to hit the financial gym right away? Have a tab on your credit reports  In the wake of getting into the Financial Fitness: Getting in shape for the New Year mode, you will have to check your credit report every 6 months or at least once a year. Credit reports give you a fair idea of whether you have been paying up your credit bills on time. You might have paid the latest credit card bill but if the same is not updated correctly you will have to inform the concerned bank authorities. By regularly keeping a tab on your credit reports and by having a very good credit rating or score, you will be entitled to receive car loans or housing loans at the best possible rates of interest. You can get in touch with an experienced financial advisor who can give you better guidance on how to improve your financial fitness. Manage your taxes You will need to file your Income Tax or IT returns by the 31st of July, every single year. You will need to furnish the appropriate details on your form 16. Duly completed form 16 has to be submitted to the IT (Income Tax Department) by 31st of July. Hence you will have to pay up your taxes. Manage your taxes well in advance, so that you can fill the IT declaration forms without any hassles. For employees, the employer himself withholds a portion of their salary as taxes. For the self-employed, differential slabs of taxation will be applicable. You will have to follow the norms accordingly. This is a great step in your wake to hitting out at the financial gym. Know who your beneficiaries are If you have taken a health policy, you would have nominated your aged parents towards receiving the claim. This is in the eventuality of a major health setback. For PF you generally nominate either your parent (s) or your spouse. In the event of your death, it is either your living parent or the spouse who will have full access to the money accumulated under the policy. As the policy holder, you need to have the complete information on whom you have nominated for. Check if your investments and goals are at par with each other You might have invested a portion of your money towards lucrative retirement plans. Else might have invested your money with mutual funds. Your goals keep changing every now and then. Hence the homework you have is, to re-evaluate the money that is accumulated under each saving instrument and check if the money matches up to the goals you have at hand.

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