Finance happens to be an integral component of a developed economy. The managing of accounts, budget and other credit options is essential to keep record of things.
Certain business transactions are worthwhile and they need to be recorded and accounted for. Managing finances is an art that helps in money management.
Finance is vital to every business and understanding financial analysis is necessary for business growth.
Managing finances constitutes the framework of any economy and is also crucial in a layman’s life.
Proper allocation of resources leads to an organized financial life with minimal conundrums. Several financial ethics prevent wastage of money.
Important parameters to follow before a financial year, bucket ways to save money and making important financial decisions help a person become financially sound.
To add, being aware of financial frauds and ways to use currency can also perfect financial matters.
About 157 million Americans have credit card debt to pay off. The average loan amount on a new mortgage is $309,200.
America needs to up its game in the field of financial literacy.
As a matter of fact, 30% of Americans households have a long term financial plan. Almost 44,000,000 American students have student loans.
Interestingly, 10,000,000 Americans do not have bank account.
Definition of a Financial Year
As a matter of fact, a financial year refers to a specified period allocated to the calculation of budget, profits, losses, accounts and other business transactions.
The terms Fiscal Year and Financial Year are used synonymously. Since, 1976 the US Financial Year commences from 1st July and ends on 30th June.
Things to do at the beginning of a financial year
- Review the goals
The most important step in order to succeed as a professional is to form goals and objectives. The investments a person makes must be in line with the specific goals.
If any gaps arise, then the person must invest more and gradually become successful in his/her endeavours.
Setting achievable financial goals is must to ensure growth.
- Rebalance and reset the portfolio
The process of rebalancing portfolios requires some understanding. One needs to understand the ABC of profit returns and the way to sell equity investments.
If the market around has changed then a person must keep track of the latest alterations and make smart financial moves.
- Increase the SIP Amounts (Systematic Investment Plan)
Annual increments are fundamental. It means if the income has risen, the investments must also escalate. The lifestyle inflation should not become a hurdle in the way of salary hike.
If the SIPs are running, it is advisable to increase the investment by 10-15% so that the savings rate becomes stable.
- Invest in ELSS Funds (Equity Linked Savings Scheme)
ELSS SIP must begin at a suitable time and is the best way to avoid last minute tax-planning. The ELSS SIP route is pocket-friendly and yields easy returns too.
- Have access to SSS ( Social Security System)
The Social Security System is fairly advantageous and yields profits. It is also tax free and easy to obtain.
The Americans also need to get a Social Security Number to avail the benefits pertaining to taxation.
Moreover, various private pension plans also guarantee financial security.
- Submit Tax form
These forms are important for all citizens who are not in the taxable bracket. The forms help avoid TDS on investments.
Before filling the form, it is mandatory to see an individual meets the eligibility criterion. Incorrect procedure may lead to deleterious consequences. It is advisable to pay taxes on time.
Sales and Income tax have to be paid on both federal and state level. Interestingly, sales tax varies from state to state. For instance, New York sales tax is 7%. Albany has 8% sales tax.
Additionally, there are no specific rules regarding the sales tax.
- Review mobile and cable operator plans
The mobile number portability facility can be used in case the people are paying excessively to the telecom players. Finding out cheaper plans and subscribing for yearly packs would save time and effort.
This is a smart move as far as lowering the additional expenses are concerned.
Bucket ways to save money
Determine the goals
Investments must be made by considering specific financial goals. The smartest way to invest is to figure out the kind of money needed for any goal.
These bucket ways ensure that money is being used wisely and miscellaneous expenses are being handled.
- The First Bucket
This bucket should consider the money spent or investments made in the span of 7, 10, 15 or 20 years.
It could constitute many factors like money for retirement, kids’ education, money for daily expenses or money spent on miscellaneous reasons.
It is important to determine the time frame of these needs and consider the large picture in mind.
- The Second Bucket
The investments made in this bucket have a smaller time period. The amount of money considered to manage these expenses would be certain.
Certain things like buying a new house in five years or replacing the old car would require an initial payment.
- The Third Bucket
This bucket contains funds for emergency situations and immediate needs. Emergency funds are compulsory and people must not turn a blind eye to them.
- The Fourth Bucket
This bucket contains the statutory tax-saving investments. This plays a crucial role in saving taxes which itself is termed as some specific earnings.
The term of investment is defined by tax laws instead of the individual.
Important financial decisions to make
- Manage financial life
Keeping financial life in an apple pie order ensures impeccable stability. The dependants must be made hassle-free and their needs must be adhered to.
It is a person’s prerogative to set his/her financial life in order at the earliest and be abreast of all other financial happenings.
- Impeccable way to store passwords
Since our financial matters are becoming digital, a person needs to know the ABC of computerized functions.
It is recommended to all the people to keep hard copies of their usernames and passwords. These include net banking, e-mail, ATM, Mobile Banking and social media accounts.
Moreover, this necessary personal information must be data encrypted and highly secured.
Using facilities like Password Manager ensures high level security and a smart way to keep account of the passwords and usernames.
- Appoint nominees
Appointing nominees makes things easier and is an indispensable move. It makes the process of passing of benefits and assets easily.
It is imperative to appoint nominees while opening a bank account, buying an insurance policy or simply investing in mutual funds and stocks.
One thing must be noted that a nominee is basically a trustee till the investments are passed to the legal heirs.
- Purchase a critical illness cover
Critical illnesses can erase huge chunks of peoples’ savings if they are not prepared.
However, a contingency fund takes care of one time-surgery or hospitalization.
In this case, a health insurance and critical illness cover are mandatory.
- Pursue estate planning
Estate planning and documentation are considered to be one of the most important tasks.
The first important step is to prepare a will and list the legal heirs to avoid conflict of interest.
The next step is to prepare a list of ongoing investments, acquired assets and liabilities.
An important thing to keep in mind id to prepare separate folders for bank deposits, pot office schemes, mutual fund investments and real estate deals.
They must contain the necessary details and important credentials.
- Cover the loans
It must be noted that the life insurance policy must cover all loans. They loans should be such which could be repaid easily.
Things to do with soiled notes
It is quite common to be stuck with mutilated or soiled notes. There are plethora of ways to use these notes and benefit from them immensely.
- Exchange at the bank
It would be surprising to know that all banks do accept mutilated or soiled currency notes.
Interestingly, fees is not charged and this facility is readily available at the nearby banks. If a bank employee suspects that a person has deliberately cut the notes then they are unaccepted.
- Pay the bills
Not many people know, but the bills and regular expenses of things can be paid with the soiled currency.
It would be accepted without any fuss and not much ado being made about them.
It is a good way to reuse the soiled or mutilated currency and not let the notes go neglected.
- Deposit it in the account
As per new guidelines, the soiled notes can be deposited in the account. The soiled notes would not be issued to the public and would be in the repository of the bank.
- Exchange the notes
The notes can be exchanged within 30 days in case of non-chest banks. The money can be deposited along with a receipt which the banks are unable to exchange.
The payment would be made around a month.
- Deposit notes at Issue Office
There are some notes which are not exchanged in the banks because they are partially burnt, extremely brittle or inseparably stuck.
In this case, the person must deposit them at the Issue Office. There are also situations in which the notes bear political messages and various slogans, these are unaccepted by banks.
Beware of financial frauds
A person must make use of some discriminatory intelligence while buying financial services. They must be used judiciously by knowing the pros and cons.
- Over-persuasive agents
People must refrain from trusting agents who hurry up the decision making process of buying financial services.
It is advisable to wait for a couple of days before making hasty decisions.
Meanwhile, a person can research for the investment plans and seek alternative opinions.
- Assured ROI (Return on Investment)
If an agent is giving assurances on returns from investments in market linked products he/she is making a Mickey out of that person.
Assured returns can be ensured by fixed deposits, insurance policies and bonds.
- Evaluating past performance
It is quite surprisingly that a fund gave worthwhile returns in the past two or three years would continue to do so.
- Escalating prices
The most preferred trap of real estate agents is to play with the insecurities of the clients. Excuses like rising prices are commonplace.
It is advisable to not blindly trust these real estate agents and look for plausible and convincing reasons.
- The more the merrier
Nowadays, such schemes are widely popular known as Ponzi schemes. The investors are paid handsomely by attracting people to make certain investments.
Gradually, when the scam becomes big and the promoters have minted enough money, these people disappear. They belie the expectations of people and often mislead customers.
- Earn for nothing
A commonly occurring financial fraud is the huge payment made for answering survey questions. It is practically impossible to get money for such pointless surveys.
People are duped into believing that these surveys are true. A lot of time is wasted and false promises are made.
To wrap it up, finance constitutes an important aspect of a person’s life. Keeping track of one’s transactions ensures financial stability. There are various methods a person can follow to have a better financial life. Certain tried and tested ways keep financial frauds at bay. Simple bucket ways to save money and make good financial decisions help manage finances better.
Evelyn W. Minnick has attended the University of Michigan and passed with MBA degree. She also has an additional six years of experience which gives her an edge over her competitors. Her immense knowledge in the field of Business, Finance and Economics has chiselled her sensibilities. It has also acquainted her to a wide spectrum of financial know- how, thus broadening her perspective. Her tremendous knowledge about finance helps her write critical essays on financial topics. Her writing samples are critically evaluated by her counterparts who often shower heaps of praises on her.