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“A goal without a plan is just a wish.” – Antoine de Saint-Exupery

I have often found it amusing that the new financial year in India begins on April 1, otherwise popularly celebrated as the April Fools’ Day across the world. Whether this is an apt testament to –

(a) the perennial state of the Indian economy in so far as the poor are concerned; or

(b) the various financial scams which rock India from time to time; or

(c) the condition of various companies’ financial documents that often make it to the pink dailies; or

(d) the various investment and saving dilemmas that confront financial investors like me;

April 1 certainly marks an important date in my calendar.

Why?

Since 2007, when I first started earning, I would diligently start thinking about plans for my money for that particular financial year and how it fit into my life’s overall scheme of earning, spending, investing and growing it. The original trigger perhaps came about when my father insisted that while being born without a silver spoon is fate, I should not confuse it with my destiny. He used to say that there is a lot of financial merit in working hard and putting my earmarked investment money in the Public Provident Fund (PPF) scheme of the Government of India. In particular, he insisted that I transfer the entire permissible amount as a lump-sum into my designated PPF account before the 5th day of the calendar month of April, given the peculiarities of PPF and how its interest is computed, in order to get the maximum possible interest return for that month and the ensuing financial year. Since the eligibility clock for putting in such permissible amount in PPF reset itself every April 1, the sweet spot for the initial financial planning and execution was, therefore, in the early few days of April every year.

Though my personal investment preferences have since evolved, my father invariably taught me perhaps one of the invaluable lessons in personal finance. In other words, plan and pay yourself first.

According to Investopedia, “’Pay yourself first’ … means automatically routing your specified savings contribution from each paycheck at the time it is received. Because the savings contributions are automatically routed from each paycheck to your investment account, this process is considered to be paying yourself first; in other words, paying yourself before you begin paying your monthly living expenses and making discretionary purchases.”

Top 5 reasons why financial planning in April is personally important and deserves an inaugural blog post from me?

1. Simple- it allows me to honor the time tested rule of “pay yourself first” right at the onset of the new financial year. As Benjamin Franklin put it best, “a penny saved is a penny earned”. Moreover, if you invest the saved penny well, it is a dollar earned over a period of time and a gift which keeps on giving.

2. As evident in the question itself, it allows me to “plan” and allows me to keep a disciplined eye on the financial ball. Failure to plan often tantamounts to planning to fail. Financial planning allows me to get a disciplined headstart at the beginning of the financial year and exercise a deliberate choice towards my goal of financial well-being, as opposed to being stuck in random financial products (read wrong financial products) which do not fit into my financial journey (wow- I wrote a particular word 6 times repeatedly in a sentence. Rules of grammar be damned at the altar of emphasis, this must be important!).

3. Investments made early at the onset of the new financial year, especially in tax-efficient investments, means that my money has more time to compound and multiply in a disciplined manner. It is important to make your money work for you (well, certainly work harder and longer than you do!) and Albert Einstein may (or may not) have said it best: “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

4. Personally for me, it serves as the mental “reset” button, when I plan for my annual personal budget (especially in light of the new Indian budget rules on investment and taxation which inevitably kick in every new financial year), learn from my financial mistakes of previous year, and re-evaluate my strategies in achieving my short-term & long-term financial goals. As Seneca wisely said, “if you sweat in times of peace, you bleed less in times of war”. It is pointless to have a financial plan, if you abandon it mid-way.

As disposable income typically tends to rise on a year-on-year basis for a variety of reasons (hint: compounding also has an important role to play in the rise of disposable income), it is also a good opportunity to:

(a) consider and implement an increase in percentage of investments made in relative proportion to income; or

(b) pre-pay the high interest loans or credit card dues; or

(c) make new financial goals in light of the increased bounty.

5. There are some practical considerations driven by Indian law of income tax. For instance, a lot of employers in India ask their employees to provide a self-declaration in relation to their proposed (and sometimes tax-deductible) investments and expenses. This allows such employers to appropriately deduct tax at source from the employees’ salary and prevent excess deduction of taxes. So more take-home money in the hands of an employee is technically possible if s/he has been thorough and comprehensive in this exercise of furnishing the self-declarations.

And there are Form 15G/15H related considerations. One may avoid the customary, upfront tax deduction at source by the banks by filing of Form 15G/ 15H with the concerned bank, in case they are eligible.

Finally, if you can’t do it in April and have missed the financial planning bus, or prefer some other amenable (or perhaps auspicious) time of the year, do it anytime as soon as possible. I have often encountered financial procrastinators in friends and family who’d do anything to indefinitely delay the unsexy task of putting the state of their financial health together. With the benefit of financial safety net available to few select Indians, taking care of your own financial health is important and planning is the first step to being financially healthy. After all, if you are not planning on earning, spending, investing and growing your money, you may end up living someone else’s dreams rather than your own.