Another year and decade have come to a pass. The year-end is a time for relaxation and celebration, but it’s also a time for reflection. Which is why it’s advisable to take a moment to check on your financial health. It’s December. We are eight months into the financial year. You’ve had plenty of time to take all the steps necessary to improve your personal finances. After all, we must aim to end each year wiser, healthier and wealthier than the last. So what are these financial steps? Did you miss taking them? Let’s look at the steps and what to do if you haven’t taken them yet.

Check your financial goals

In money management, goal-setting is critical. Without a goal, you can’t find financial focus. This can hurt you in many ways: your tax burden could rise, you may lack adequate insurance, your wealth creation can slow down and you will lack liquidity in moments of need.

The best time to set financial goals is April — when the financial year starts and when salaries are revised. If you haven’t set your goals, you’re late and have little time to lose. But better now than later in March when you’re likely to make poorly-thought, hurried decisions that can hurt your finances.

A financial goal is typically set to save X amount of money in Y amount of time. The goal is broken down into small, monthly contributions, such as EMIs you need to pay yourself. If you’ve set your goals, well done! December is the time to take stock of your progress on those goals. If you’re on track, well done. If not, consider some tweaks. Consult a financial adviser whose expert advice could help you save millions in the long run.

Know your tax liabilities

Many make the mistake of leaving tax-planning for the end of the financial year. This leaves them with little time to make well thought-out decisions.

A typically Indian way to save last-minute taxes is to buy investment-linked insurance plans. While this covers their tax liabilities, it impedes wealth creation, dries out liquidity, and extracts a hefty cost for inadequate coverage.

By December, you should have figured out your tax liabilities. If not, you should make haste. Take stock of your total liabilities for the year as well as taxes deducted at source by your employer, clients, or your bank.

Also assess your various incomes for the year — bank interest, capital gains from stocks and mutual funds and sale of property. Each income is taxed in its own unique way. For example, the tax on long-term capital gains (LTCG) on stocks is 10 per cent plus cess on gains over Rs 1 lakh, but on real estate it is 20 per cent plus cess with indexation benefits. Try to educate yourself about your various taxes so that you’re better prepared to save taxes over the next four months.

Consider tax saving options

Depending on your life stage as well as tax liabilities, you should have bought some or all of the following: life insurance, health insurance, 80C tax savers such as PPF and ELSS and pension schemes such as NPS or annuity plans.

You should have also accounted for taxes you can save through interest paid on your home or education loan, as well as the various deductions available to you under the Income Tax Act.

If you haven’t bought enough tax-saving products for the year, you should do so now. If you’re looking for 80C investments, PPF, Sukanya Samriddhi and top-rated ELSS funds can be your go-to options. It is also necessary to spread out your tax-saving contributions through the year so that the burden doesn’t hit you in the last quarter.

Step up wealth creation

Your income will increase with time. Therefore, your savings and investments should also be revisited annually. Investment plans should be stepped up in line with your income hikes.

For example, if your income went up 10 per cent this year, your investment should ideally have been stepped up by a similar margin. So, if you had a monthly mutual fund systematic investment plan of Rs 5,000 last year, you should increase it to Rs 5500.

Stepping up your investments annually will help you achieve your financial goals quicker. Also, you can’t invest at the age of 35 in the same manner that you did at 25. If at 25 you had started a monthly SIP of Rs 5,000 expecting returns of 12 per cent per annum, the plan will create a corpus of Rs 11.61 lakh in 10 years. But, if you had annually stepped up your SIP by 10 per cent, your corpus would be Rs 16.87 lakh, or 45 per cent higher.

Similarly, you should have also topped up your emergency fund in line with your recent lifestyle, family’s needs and increasing income.This fund should be equal to 3-6 times your current monthly income, locked in an FD and used only during emergency such as a job loss, health problems, accidents, repairs or anything insurance won’t cover.

Assess your insurance needs

Just as your lifestyle, investment plans and family’s income needs evolve with time, so should your insurance coverage. Ensure that you periodically increase your family’s health insurance coverage in line with medical inflation and health needs. This is especially important for your ageing parents whose healthcare costs are higher.

If you’ve already taken these steps, you need not worry. But if you haven’t, you have little time to lose. So, start now, avoid the year-end rush in March and end the year on a strong note.

The writer is CEO, `BankBazaar.com`