As we approach the end of the year, it is crucial to pay attention to managing our finances. Towards the end of the year, people often unknowingly make mistakes that can lead to financial troubles in the future.
In this article, we will discuss these common mistakes and provide you with ways to avoid them. Let’s move together towards a safe and prosperous year ahead.
Unnecessary Expenses
Towards the end of the year, many people tend to spend money without much thought, resulting in a natural shortage of funds later. This often happens through credit card transactions, where people make purchases beyond their actual needs due to various offers and discounts. This can make it difficult for them to save for the future.
Avoiding unnecessary expenses is easy. If you come across a product or item at a discount, ask yourself whether you really need it or if your life can function without it. If the answer is that you can manage without it, it’s better to refrain from making the purchase.
Failure to Plan Taxes
Tax planning involves creating a strategy that minimises the taxes you have to pay based on your financial situation. When investing in the stock market, you also need to plan for taxes on the profits earned from investments.
In India, if you sell your shares or equity funds within one year, you are liable to pay short-term capital gains tax, which is 15%. If you sell them after one year, long-term capital gains tax is applicable, which is 10%. However, if your profit is less than Rs 1 lakh, you are exempt from paying taxes. Therefore, planning for long-term investments is advisable as it incurs a lower tax rate.
Failure to Improve Investments
Not reviewing and not making improvements to your investments at the right time is a common mistake. It is essential to periodically review your investment portfolio in different market conditions to make changes when necessary.
Rebalancing is a process where changes are made to the portfolio based on market conditions and financial goals. It involves exiting underperforming stocks and replacing them with others. Portfolio rebalancing is a way of regular maintenance for your investments, similar to getting regular health check-ups and seeking treatment for any issues found.
Not Reviewing Financial Mistakes
As we are about to enter 2023, it’s time to review all the mistakes made during the year, especially those related to investments. Identifying your mistakes is the first step to rectifying them.
Create a list of mistakes made between January and December, which led to financial losses. After listing the mistakes, note down the reasons behind them. This way, you can avoid repeating these mistakes in the upcoming year.
For example, if you invested without understanding the financial situation of a company or based on someone else’s recommendation, consider researching before investing in any company. If you lack the time for research, seek advice from a financial advisor.
Conclusion
In summary, at the end of the year, we should understand where we made unnecessary expenses during the year and be aware of financial mistakes that should not be repeated in the upcoming year. Additionally, paying attention to taxes is necessary, and starting the new year with a new plan is advisable.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer
