The New Year is a great time to overhaul your life for the better. And what better way to do it is make those kind of resolutions that will act as a constant guide in that endeavor. For this, Resolutions, like goals, are best when they’re specific.
Financial resolutions made during beginning of the New Year can determine the shape of your short and long term financial objectives whether is it increasing your savings for retirement or putting aside a little extra for this year’s down payment of that property.
If getting your financial life in order is a resolution for you this year, here are some ideas that may help you get there faster:
1. Save Smartly!:It is common knowledge that
- Income -Expenses = Savings
We suggest change that equation from this year, make it
- Income – Savings = Expenses
This new equation will help create an automatic budget, and will ensure you only spend after saving.
Use automatic investment ideas like SIPs and STPs to transfer your monthly savings to dedicated investments for your goals.
2. Have Contingencies, for everything!:
Dangers and risks are ever present. They can have sudden and significant impact on your finances if they are realized. So it’s better to be safe that sorry.
- Having a highly liquid corpus (available to you in 48 hrs or less) is one way of doing it.
- Another useful and highly critical step is getting adequately insured. While a variety of insurances are up for grab, focus on the basics first. Sufficient health cover for your family and yourself should top the list.
- Followed by insurance for specific risks such as critical illnesses, accidents and even insurance for your home.
- Another smart thing you should do is take a insurance for any big ticket loan you may be servicing, such as a home loan. You do not want to burden your dependents in the event of you passing away, do you?
3. Have a Strong Debt Strategy:
- Home Loans / Education Loans
Not all debts/loans are equal. It is essential for you to know which loan is drawing the most interest from you. Also some loans are useful, such as home loan as you have access to an appreciating physical asset or a educational loan from which you stand to appreciate the biggest asset of them all, yourself! Plus it does not hurt that they have tax deduction benefits.
- Personal / Credit Card Loans
Personal/Credit Card loans should be ticked off at the first available opportunity, simply because they have high interest rates. If you had to choose between investing into a fixed income product or pay off a high interest loan, you should ideally opt for repayment. Interest saved is interest earned after all!
4. Know what you want:
It is said “If you don’t know where you are going, well then, any road will take you there”. It is better to have well defined goals. A goal helps you focus because the end objective is clear. For example, it is probably not enough to say, “I will save some money for that amazing Europe vacation that I always dreamed of.” It needs a lot of planning and finances. You not only need to know the destinations you will visit, you also need to the travel routes you will need to take, how much funds you will need, where all do you intend to spend and so on so forth. The more crisp your goal is, the better actionables you will be able to achieve.
5. Invest in yourself:
In today’s highly dynamic world, the word of the day is “reskilling”. As a professional, now more than ever, you have to stay on top in your industry by constantly upgrading your skill sets. Therefore always ensure you have enough kitty set aside so that you can opt for those special courses which will give you that edge in your profession.
While not all resolutions can be worked on simultaneously, it is important that you start with some and even more importantly that you stick to them. Give your resolutions time lines so you know what to prioritize. And work towards strong finances and a worry free New Year 2018!
Plan Ahead - Simplifying your financial life 