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How to create a personal financial checklist for yourself

If you are the typical high growth seeker then mundane things like checklists may appear to be quite boring to you. But when it comes to your personal finances and your financial future, everything eventually boils down to checklists. It is not enough to create a personal finance plan as a one-off affair. You need to begin with an annual personal finance check list and then make it more granular into a monthly personal finance checklist. You may not require a monthly personal finance checklist to begin with but at least your annual personal finance check list is a must. You need to understand the key steps to creating a personal finance plan and how the checklist fits into your plan. Give below is a 10-point personal finance checklist template that you can use at the beginning of each year.


1.  Reflect on the year gone by

That is where you begin each year. Look back at the year in terms of the performance of your investments. Also look back at how much closer you have gotten to your eventual goals and where has the gap increased. This is a broad view of the year gone by and your performance will largely depend on how the overall equity and debt markets performed.


2.  Review your net worth statement

During the year gone by you must have added assets and also added to your liabilities. Look at the market value of your net worth at the end of the current year and compare it with the previous year. Is the YOY growth satisfactory or does it leave room for improvement. That gives you an idea of where you should prioritize, both on the assets and liabilities side.


3.  Review your investment performance on risk-adjusted basis

This is a key point of analysis. You need to see how your funds performed with respect to the overall benchmark index and also with reference to the peer group. Occasional under performance is part of the game but if you are consistently underperforming then there are some serious questions you need to ask. Also look at these returns in risk adjusted terms. Are you taking on too much risk for the given level of returns?


4.  Check that your insurance covers are adequate
This is an important piece of check list analysis that you need to do. Is your life cover adequate considering your additional liabilities? Annual increments will mean that you need more insurance to cover your higher routine expenses. You also need to review if your health cover is sufficient and whether it needs to be increased. Above all, are your assets and liabilities adequately insured?
5.  Ensure that your commitments are pre-funded

This is something you must ensure at the beginning of the year. First prioritize your major commitments during the year like college education, home loan repayments, asset purchases etc. Then ensure that your routine EMIs and SIPs are pre-funded. Once this is taken care of you actually get an idea of the kind of investable surplus that you can deploy productively.


6.  Weigh your interest cost as percentage of income and review

This is something that goes to show your solvency and your debt servicing capacity. Each month you have an EMI commitment which has an interest and principal repayment. The principal repayment is at least reducing your liability and to that extent it enhances your net worth. If the interest payments are more than 20% of your monthly income then you need to seriously reconsider your financial mix. Either your debt is too much or the cost of your debt is too hot to handle.


7.  Ensure to remit all taxes on time, well in advance

Create a complete timetable of your tax payments. There are a variety of tax outflows that your routine activity entails. If you are a businessman or a professional, there is advance tax that has to be paid on your regular income sources. Secondly, if you have capital gains then the advance tax for the same has to be paid each quarter. Also ensure that other statutory liabilities like your property tax and road tax are paid well in advance. Above all, ensure that your income tax filing happens well before the due date.


8.  Document all your paperwork meticulously

Documentation does not appear to be a very exciting task but your entire checklist is pointless if your entire personal finance is not meticulously maintained and documented. It is not just about the ownership records like fund statements and equity demat holding statements. It is also about how your plan is reviewed and updated and the follow up action on your plan that really needs to be meticulously documented.


9.  Plan your capital gains and losses

This point acquires added significance from the current financial year as LTCG will also attract tax at 10% above Rs.1 lakh without the benefits of indexation. That means you need to plan your capital gains in such a way that you spread it across multiple years to reduce the impact. Also, short term gains and short term loss harvesting must be planned well in advance so that you can reduce your year-end tax liability through set-offs.


10.  Rebalance and restructure your portfolio and your personal finance plan
Finally, the most important item in the checklist is when to rebalance your portfolio and your plan. Has the share of equity gone beyond the originally stipulated levels? Is your mix of equities and bonds reflective of your current risk appetite? Is your portfolio mix reflective of the current market realities? These are important questions that will determine how your portfolio gets restructured and rebalanced so that you move surely towards your medium term and your long term goals.

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