Financial Resolutions for the New Year
May 3, 2022Come New Year; everyone has their own resolutions more on their personal and health front. But is that enough? Have you ever thought of coming up with a resolution for the New Financial Year? Usually, resolutions are hard to stick on to. Every year, we keep on adding resolutions, some of which are impossible targets. But in the case of a financial resolution, we can always have a calculated approach to a realistic resolution. In this article, we try to showcase a few ideas about the practical resolutions to make personal financial management look simpler.
Do proper budgeting – To have a hold of your expenses, you must be able to budget your money properly. Budgeting is a good tool that helps us in knowing our spending pattern and derive our monthly surplus or deficit. It helps us to analyze and plan our expenditures wisely.
Start investing instead of just saving – Many people have the habit of keeping their hard-earned money in low yielding instruments like savings banks and fixed deposits. This might not be sufficient in the long run; especially in this highly volatile world with rising inflation. It is better to start diversifying and investing your savings in the right places; to help grow your money. Thus, the money you had saved, starts earning for you.
Have an emergency backup – Life is so uncertain that incidents (good or bad) can happen in the nick of the time. It is not always necessary that liquid money will be at your disposal during times of dire needs. So, it is advisable to have a corpus set aside for emergency purposes.
Have the right insurance cover – Humans are subjected to various risks to their life, health and property. Losses arising out of such situations could be catastrophic. Taking the right Insurance will prepare the individuals in coping with the situation financially.
Be financially literate – People are always curious to know the latest news related to technology and current affairs. Equal importance should be given to financial knowledge. Having a basic knowledge of the financial instruments and various options and staying abreast helps individuals to have a hold of their finances to a greater extent.
Pay Fast, Buy Slow – This simple rule of paying your bills on time and refraining from impulse purchases will make you aware of the money that is being saved. In this digital world, people are increasingly prone to impulse purchases due to ease of access, eye-catching advertisements and offers. Reining in such purchases with rational buying and also making sure that all the bills are cleared off on time helps individuals to have good control of their finances.
Active investments that are tax-efficient – Prudent investment strategy is one that is tax-efficient as well. It has to be one’s endeavour to minimize taxes and maximize the gains. Taxes can be one of the biggest expenses and take the biggest bite out of one’s returns. Tax-efficient investment becomes more important when your tax bracket is higher. Investments that aren’t tax-efficient are better off in tax-deferred or tax-exempt accounts.
Involve your family in every financial decision – In our country, most financial decisions are taken by the bread earner or the head of the family. In this process, the views of the spouse (usually the wife), and other family members are generally not taken into consideration. This may be because they lack financial knowledge or interest in the financial affairs of the family. However, as irrelevant as this may sound to you, it is extremely important to include them while planning or reviewing your financial plans. You might be surprised at the inputs your spouse can provide while planning your finances. The final goals may remain the same such as educating and getting your children settled, saving for your retirement and medical emergencies and so on. However, their views regarding each goal and how they would prefer them to be realized might be different.
Pay down your debts – Debts or loans have become part and parcel of everyone’s life. The extra principal or part payments can be paid off in trying to decrease the outstanding amount thereby reducing the burden and channelizing the money towards investment.
There are many such resolutions, but the key is to come up with realistic strategies and sticking on to them without succumbing to temptations. Talking to a good financial advisor will help you to pick up proper resolutions and plan in the right way to achieve them.
Plan well, save more and invest wisely.