With the new tax regime, individuals earning a taxable annual income of Rs 25 Lakhs or more can save up to Rs. 2,32,500, translating to an extra monthly amount of around Rs. 19,000. The question arises, how can you make the most of this additional money? Here are some tips to ensure optimal utilization:
- Building Your Emergency Fund: It is essential to have a financial cushion for unforeseen circumstances. Consider using this surplus to either establish or bolster your emergency fund to cover 6 to 12 months of expenses.
- Repaying Existing Loans: If you have high interest bearing personal or other loans, utilizing the surplus to make additional monthly payments can help you clear off the debt sooner than expected.
- Investing for Important Goals: For crucial financial objectives like retirement or children’s education, where there might be a shortfall in funds, using the surplus can bridge this gap and ensure these goals are adequately funded.
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- Fulfilling Desired Goals: Have you postponed your dream vacation due to other financial priorities? Now is the perfect opportunity to start accumulating this surplus in a liquid or arbitrage fund. Once the amount grows, you can finally embark on that dream holiday without compromising other financial commitments.
- Indulging on Health and Hobbies: If you have secured your financial foundation with emergency savings and funded goals, and still have surplus left, consider treating yourself to activities that enhance your well-being or passion. Whether it’s investing in a musical instrument like a grand piano or enrolling in a fitness program, now is the time to enjoy the fruits of your financial prudence.
Also Read: Which tax regime to choose this year?
(CA Vishal Shah is a founder of Bachhat, a SEBI Registered fixed-fee only financial advisor)