9 Simple Financial Resolutions You Must Make
Today aspirations of people have spiralled and monthly purchase list does not stop at the grocery and occasional suit/sari. It also has the latest iPod, better car accessories, a designer party outfit...The “more” syndrome has caught on: more money, more assets, more investments, more expenditure, more wants. To make sure you have more money for years financial planning becomes both critical and complex.
Adhering to the nine simple financial resolutions you can move towards your goals. Some resolves are those that you had always wanted to follow, others that you probably never thought of. And yet others are those sneaky ones that may have fleetingly crossed your mind, but you banished them out of embarrassment.
RESOLUTION 1: I will not keep more than one month’s salary in my savings account. What would you do if somebody stole the money in your bank account? Raise a ruckus, call the police, file a report? Well, there’s a thief who robs millions of bank accounts every day and nobody even comes to know about the theft. The culprit is inflation and its victims are people who keep large balances in their savings bank accounts. Inflation erodes the value of money. What’s the way out? If you are risk averse, go for a sweep-in account where excess money over a specified amount is put into a fixed deposit and earns a higher rate of interest. If you can stomach some risks, invest in a good mutual fund through a systematic investment plan. A one-time instruction to your bank is all it takes.
RESOLUTION 2: I will not invest in insurance to save tax but as a raincoat for the monsoon. Seven out of 10 people don’t know what kind of insurance policy they have. Five of them don’t even know how much insurance cover they have. All they know is how much premium they pay every year and how much tax they save. That’s because most of them never bought an insurance policy—it was sold to them. True, the tax breaks on life insurance are very generous but that should not be the reason for buying an insurance policy. Treat insurance as a raincoat for the monsoon.
RESOLUTION 3: I will buy health insurance for my family. Good health is perhaps one of your biggest assets. How do you protect this invaluable treasure? Well, eat right, sleep well and exercise a bit. But sickness and accidents can strike anyone. Anywhere. Anytime. With state run hospitals too overburdened and private healthcare too expensive, medical insurance has become crucial today.
RESOLUTION 4: I will not splurge with credit cards. You splurged at the shopping fest, ran up a big bill at the Christmas party, and bought yourself that slick iPod—all thanks to the convenience of plastic. And what do you do when the bill comes? Use plastic for the convenience of not carrying cash and for the interest free credit for up to 45 days. Not as a means of borrowing. And don’t get lured by offers of free credit cards. You don’t have to take them just because they are free.
RESOLUTION 5: I will not get caught in the ‘Rush of March’. You can invest in one or two big chunks in February and March or you could invest it in convenient instalments through the year. It is one of those things you keep reminding yourself of every March. Only this year, do so in January and continue doing it through the year. Not only will it save you the last minute hassles and anxiety, your investments will also grow that bit faster. That’s because each monthly investment earns interest through the year. In many cases, last month tax saving investments has to be made in tight financial conditions. There is a shortage of funds for the salaried, what with hefty deductions, while the business class is busy putting accounts in order.
RESOLUTION 6: I will pay attention to allocation of my savings. In the World of finance, everything doesn’t go right or wrong at the same time. So while the romance of money making might lure you into putting all your earnings together, it might so happen that you lose everything together. So vow to leash your greed and be more phlegmatic. Allocate your assets in the right mix of high-risk high-returns and low-risk low-return investments, spreading the risk across debt and equity and the whole class that comes between these two. This diversification will lower your portfolio’s vulnerability to ups and downs in the market.
RESOLUTION 7: I will check all my bills for discrepancies and incorrect charges.
It always pays to read the fine print. And if you’ve been paying for cell phone services that you never asked for or find in your grocery bill items you never consumed, it’s high time you start reading your bills carefully. Yet there is no substitute to individual scrutiny. In many cases, this verification is not a matter of being extra careful.
RESOLUTION 8: I will put at least 10% of my income in retirement planning. The mantra in investment is that it’s never too early. And even though you can’t imagine yourself at 60 now, the truth is that someday you will be. Then, as now, you will be looking to maintain the standard of living for which you have toiled away years. So don’t delay in planning your retirement.A retiree needs about 60% of his last drawn salary to maintain his pre-retirement lifestyle. So, make it a habit to invest at least 10% of your monthly income in any long-term savings option.
RESOLUTION 9: I will write down my financial goals once a year. If you have made all the nine preceding resolutions, congratulations. You have a comfortable financial future ahead. But making a resolution is easy. Adhering to it is the difficult part. People soon forget what they had resolved to do and their finances return to the doldrums. You can break free of this monotonous order of things by writing down your financial goals. These could be anything—buying a house, saving for your child’s education or marriage, even going on a holiday abroad. The point is, if you have written down your goals as also the investment plan for achieving them, you are less likely to lose sight of your target.
