Why Financial Planning Needs Behavioural Change

WE are near the end of the financial year.

- RAJAS KELKAR

There is a good chance that your employer will deduct more tax than usual from your salary in February and March. That is because you could not produce proof of tax-linked investments. Many of you would frantically look up your insurance statements, conveyance or rent receipts or loan certificates to claim tax benefits at the last minute. The rush towards the end of the year results from poor or no financial planning.

Tax planning needs to start in April of every financial year if you are serious about it. Put aside a portion of your monthly investments towards tax savings schemes so that you do not have to put a lump sum at the end of the year. The more you save into tax-saving instruments regularly, it is better than doing it later. There is usually a lock-in on the investment for three years. That inculcates a good investment habit. Your money needs to remain invested for as long as possible to benefit from the power of compounding.