Don't let Union Budget derail your financial plan

We just witnessed the budget presentation by the Finance Minister on Friday. Whatever could be the key takeaways, it would only impact you for a financial year, in this case just for the next three quarters of the year.

True, there would be elements where you'll need to provision higher amounts to save taxes or reduce certain things where you may need to prune but should it alter completely the way you save, consume and invest?

You wouldn't increase your daily consumption of staples just because the taxes on these products have come down and hence availability at cheaper levels.

But if need be and it turned out to be cheaper you would consider the consumption. So, the priority shouldn't be just about price of the product but the essentiality or the requirement of it.

Of course, there could be policy changes like that of on the electric vehicles where the individual could avail tax benefits upon purchase of the said category.

So, if one is looking for a car to be purchased then it would make sense to switch to an electric one where the cost of maintenance could be cheaper as the excised duty on the fossil (diesel/petrol) fuels has been hiked and more importantly the incentive of the tax concessions.

The total tax exemption of Rs 2.5 lakh on the interest paid for acquiring the vehicle over the entire period of the loan is too enticing to be ignored.

Also, the introduction of an additional concession on interest for the housing loan of Rs 1.5 lakh for houses valued up to Rs 45 lakh is another such occasion that's too tempting to be overlooked.

This is in addition to the annual exemption to the tune of Rs 2 lakh on housing loan interest which could translate to about Rs 7 lakh over a period of 15 years is undoubtedly enticing.

So, should you be considering a purchase of a house under Rs 45 lakh or switch to an electric vehicle considering the additional benefits the budget has provided for? This is why financial planning is crucial.

The above are real cases of temptations that could derail the overall plan if not well thought. The consideration of upgrade in the mode of transport can't be out of tax implications alone but on the utility, personal cashflow and frequency of usage, etc.

Similarly, opting for the housing loan amount or the property for which the loan is opted should be dependent on the requirement of the house, the location, the size, etc of not just the current situation for with an insight into the future.

A financial plan helps us to define various goals, their timelines and the possible cash requirements while prioritising each of them. This assists us to take decisions as earlier planned and control the urge to act irrationally in between.

However, it's not to be seen as an iron will that is impregnable or unamended, but it certainly gives a sense of direction and importance of each of the goals.

More importantly, a financial plan builds in the discipline which helps to create corpus that help in taking advantage changes that are obtained like that we are witnessing through the budget.

While the budget presented by the Union government is an annual drill, the implications of the changes may not be always useful and at times could turn detrimental to our wishes.

Nevertheless, our life continues and thus the timelines to achieve our goals irrespective of the government policies and so financial planning could help us retain the focus while continue to achieve the defined goals.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at knk@wealocity.com)