Year Ender: Top Personal Finance Tips To Learn From 2023

The year 2023 saw a shift in many personal finance concepts. Though inflation continues to be a concern, it has been estimated that India's per capita income has grown at a CAGR of 9.3% over the last 10 years and is further expected to grow 7.5 times by 2047. Thus, the population today has more disposable income. Along with an increase in income the instruments available for investing and saving along with the awareness on the same has been the highest. The adoption of digital banking and the popularity of financial literacy applications are adding to the focus on managing one's finances and investments.

The tech adoption driven by UPI has been a game changer across all sectors. It is now easier to reach customers with seamless distribution and customer journeys driven by paperless and digital. It has also made it easier for customers to gain information, compare various investment plans and get access to newer investment avenues. Some of the key Personal finance trends observed in 2023 are as follows:

Financial protection: With the shadows of the Pandemic one of the key factors that continues to be important is stability and security. Financial safety is one of the key pillars of personal finance. In these life insurance and health insurance are the most critical along with securing other key assets. Providing financial protection for oneself and one's family ensures financial immunity against various uncertainties.

Defining Financial Goals: Defining one's financial goals is a very crucial part of personal finance planning. These goals vary depending on age and future preferences. These can include anything from buying a house to planning a vacation. However, one of the crucial aspects to keep in mind is to plan for retirement goals as well. The year 2023 saw an uptake in products related to pension and retirement planning like annuity, showing a trend towards retirement planning as well.

Tax planning: Ensuring that all investments are made in such a way as to ensure optimal tax payment is crucial. While saving it is crucial to look beyond the marketed returns to understand the total cost of investment and compare with the post-tax returns.

Houses and Real Estate: Though it is widely believed that millennials do not perceive buying a house as an emotional decision and are comfortable living on rent, the residential market sector has seen strong growth in 2023 which is expected to sustain in 2024. There has also been an upswing in the demand for luxury houses as well in 2023. Further, the decision to invest in housing or real estate depends on one's preference, financial requirements and life stage.

Consistency in investments: One of the most important principles in personal finance is systematic saving. It ensures discipline in saving with regular amounts set aside for savings. While mostly alluding to the market-related funds, systematic investments in guaranteed return products have seen good traction too. Thus depending on one's risk appetite, financial goals and preferences there are a range of financial instruments available to the investor from recurring deposits, savings-linked insurance plans, mutual funds, etc.

BNPL and creating a budget: The current BNPL trend is also impacting consumer spending and savings. With the ease of small loan availability customers are able to buy and experience more things in the present rather than wait "to save" for these. However, the amount of EMI one can safely pay should be considered while planning for these purchases and deciding on a budget for expenses and savings. The tech-led innovation in the lending space has led to many options. Peer-to-peer lending fin-tech products are gaining good traction providing opportunities for both borrowers as well as people looking to make quick returns by lending money.

Among the other trends that have picked up during 2023 is the automation of finances which helps in saving time and money. Immediate transfers to savings accounts help build discipline in savings and also payment of bills. Another key emerging area has been the investment in sustainable investments that are committed to ESG practices. These investment options are becoming increasingly popular.

Overall the key to ensuring financial independence would continue to be ensuring financial safety, goal planning, budgeting expenses including EMI payments and consistent investments.