Wednesday, December 31, 2014

Time to make some NEW YEAR Resolutions

New Year is the time for celebration, gifts, drink and dance. But it also reminds you to take some resolutions, so that New Year can be better than the one just passed by. So this year let’s make some of the following resolutions to make a better managed financial life. It will help you to reach your financial goals.

1) Contingency Planning: First thing you should do is plan a contingency fund may be 3-6 months of your expenses, depending on kind of a job or business you are in. Always create and maintain an emergency fund. This is the only source which you can access in case of emergency may be medical or job loss.

2) Prioritise your Debts: Understand not all debt is same. Make list of all your debt and try to get rid of the ones against which you are paying highest rate of interest. It doesn’t make sense to invest your money in an Fd or Mutual fund when you are paying 30% interest on your credit card due.

3) Budgeting: If you haven’t make a budget then it is the time you should start making one. Budgeting help you to plan your bigger expenses and help you avoid impulsive buying.

4) Know your goals: Our tagline is “Aao Sapno Ko TARIKH De” which means first list down your dreams and then put a date by when or in which year I want to achieve it. To start any planning we need to list down what all we want to achieve. So this new year just make a list of financial goals you wish to achieve. Then break it into 2 parts i.e need and want. Needs are the one which in any circumstances you have to achieve e.g. your child’s education, Daughter’s marriage or your retirement. The balance left out will be your wants e.g. owning a vacation home, foreign trip every year etc. From the definition it is clear your needs will be given first priority and wants after that.
5) Clean up: Every investor investment bucket is filled up with the products advised by a friend, neighbor or a relative. Just review them whether they still holds some value. There are lot of better alternative products are available especially in mutual fund space. Which are transparent as well as cost and tax efficient. So close down all such products and switch it to better alternative. May be you need to pay some penalty today but in long term it can add multiples of such penalties to your wealth.
6) Know where you money goes: Gaining control of your financial situation and using money to help you reach your goals is possible, but first you must recognize where your money goes. Evaluate your habits. Start by jotting down everything you think you spend money on during a one-month period. Within the expenses differentiate between discretionary (e.g Eating our, Watching movies, replacing gadgets more frequently etc) and non discretionary (e.g. Electricity bill, Rent, Grocery etc). Start cutting down on discretionary expenses.

7) Avoid tips or offers giving assured, fixed and high returns: Remember every extra % of return offered over and above market return comes with that extra % of risk, so try to shy away from the schemes which doubles your money in very short span. Also check investments products you are investing in are regulated by govt. Appointed regulator and avoid ponzy or tip based investment. Your friend or relative might have recommended that but it is you who loses money when it bursts.

8) Consult a Financial Advisor: It is always beneficial in long run to seek professional help. In short run it might look like a cost but over a period of time, it would help you to avoid unnecessary investments. He will guide and a hand holds you during your financial journey and helps you reach your goals comfortably.

9) Do some Charity : Lastly do not forget to do some charity, help the people who are less fortunate. Remember we are lucky that we have access to the things which atleast 50% of the population don’t have.

So let’s create a bright future for ourselves and for the country. Wish you a very Happy and Prosperous New Year.