One more glorious year is nearing an end and there awaits another splendid one. While the coming days are filled with festive season frolic, this is also the time for the yearly ritual of assessing your financial health. This also calls for creating a solid financial plan for the next year to keep your money game strong. So here are some tips to help you with year-end financial planning

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Review your portfolio

It is always good to keep reviewing your investment portfolio periodically and year end is a good time for this. This is to ensure that your portfolio is on track. Take a note of the total returns your portfolio has generated this year.

Check whether your portfolio is well diversified or not, there shouldn’t be more funds of the same category, as it may lead to overdiversification and ultimately hurt your returns. You can consolidate your portfolio in such a way that you have only one top-performing fund under each category.

Also check whether the asset allocation between debt and equity is as per your goals. For instance, if your portfolio is predominantly equity oriented, you can increase exposure to debt funds (you can choose liquid funds) to create a balanced portfolio. Investing in liquid funds will not only allow you to meet expenses during an emergency, but also minimise short-term losses due to equity.

And finally, check the performance of individual funds. If you see that the past returns of this fund compared to other funds in the same category is lower, then you can stop SIP. You can then channelise your money to a well-performing fund in the same category instead.

Take care of your taxes

This is another extremely important exercise which needs your utmost attention while assessing the current year and planning ahead. Tax planning should never be a standalone, last minute activity. It should be included in your financial plan. Watch out where you stand in being taxed. If you are at the margin of crossing over to the higher tax slab, manage your deductions and work on your increased tax exposure.

Invest in avenues that fetch you dual benefits -- high returns and tax benefits. ELSS or Equity Linked Savings Scheme is one such option that comes with dual benefit of tax deductions and high returns. Also, they have the lowest lock-in among other tax saving instruments which is an added advantage. Plan your taxes in advances and fully utilise the exemption limit.

Finish of existing debts and loans

It's good to enter a new year with minimal to no debt. Plan your finances in a way that equips you to clear off your loans and debts as soon as possible. Your priority should be to pay off short term loans first that accrue a higher rate of interest. For instance, credit card debt should be finished off at the earliest. Then move on to long term loans, say home loan, and accommodate their complete or partial repayment in your financial plan, as the case may be.

Increase your contribution to ongoing investments

End of the year also fetches you goodies in the form of festival bonuses. Also factoring the increment you may get next year, you can proportionally increase your contribution towards your long term investments. For instance, if currently you are contributing 20 percent of your income towards investments, consider making it 25-30 percent depending on your family requirements.

Review or buy your insurance policy

This is the time you must review your insurance policies and if you are not insured yet, you must plan to do so in the coming year. Do not consider insurance as an investment, rather it is a life cover that will ensure that your family will not get stranded if something unfortunate happens to you. Always go for plain-vanilla insurance scheme that comes with lesser premium and higher or similar coverage as other fancy products in the market.

Start investing if you haven’t already

It may so happen that until now you may have been investing in traditional financial avenues like FDs and PPFs. While it's good to have them in your portfolio, if you are looking for accelerated wealth creation, mutual funds are your best bet. It is one of the few instruments that can offer you inflation beating returns. There are a wide variety of funds you can choose based on how much risk you want to take and whether your goals are long term or short term. Remember, any time is a good time to invest if you enter with the right expectations and a sound strategy. All you need to do is take the first step. Check out a few online investing platforms that are suited for novice investors such as you. They can provide you with the requisite resources that can help you make the right investment decisions.

While you look back at the passing year and plan ahead, take a minute to appreciate the financial milestones you have achieved as well as take note of the lows. Make a new plan factoring in all variables and try to stick to it. However, make sure your plan is flexible enough to accomodate occasional splurges, so that you don’t feel guilty about indulging yourself and your family.

Harsh Jain is Co-founder and COO of Groww.