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New Year Resolutions for a better financial life

08-01-17

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I resolve to…

As you plan your big party this holiday season, why not allocate some mind space to the things you would like to do in the New Year.

Psychologically, New Year is perceived as a time when one can start afresh, almost like on a clean slate. Although it is just another day, the change of year feels like a big change and an opportunity to do things we always wanted to do. We may call these New Year resolutions or anything else, but it is definitely exciting to put together a to-do list for the New Year.

So while you make mental notes or write down your resolutions for 2017, here is a list we propose for you to ensure a better financial life.

1) Build a contingency or emergency fund
Set aside at least 4-6 months expenses in safe and liquid instruments to meet any emergency situations. This is your rainy day fund to tide over any contingencies viz. Medical emergency, loss of job, a friend or relative in need. This deserves to be on top of the list and is an absolute must do.

2) Cover your risks
What risks are we talking about? Risk to life, risk to health, accident risk and risk to property. Assess if any of these risks were to materialize, what would be the financial impact on the family? Take the right insurance cover wherever you find it would not be possible for you or your family to bear the financial loss.

3) Save before you spend
Change your equation next year from ‘Income – Expenses = Savings’ to ‘Income – Savings = Expenses’. Saving is critical to secure your future and meet the important goals in your life. Your ability to save during your working years will determine the quality of your life in both your working and retirement years. Even you have to start small, the important thing is to start.

4) Say “NO” to financial products you don't understand
Very often, we invest in financial products that we don't understand. This habit alone can cause a lot of damage to our financial future. Don't get lured by promises of high returns and security. Unless you understand the product, do not sign on the dotted line. This year, learn to say “NO”, even if it is a dear friend or a relative who is selling you what you don't need.

5) Stay away from high cost debt
Running a credit card debt is not uncommon for many. Despite acknowledging the fact that interest charged on it is almost criminal, people keep using their credit cards to fund their expensive purchases. If you are sitting with fixed deposits and paying a 30-36% interest on credit card, it is foolhardy. So, do not carry a debt on credit card and if you already do, use all possible resources to get rid of it.

6) Put down your financial goals in black and white
Whether we acknowledge them or not, we all have certain financial goals in our life. There may not be much of a choice when it comes to certain critical goals such as those relating to children or retirement, but there can also be certain aspirations or dreams, which we want to fulfill in our lifetime.

It is good to put down your goals in black and white and check if you are on the right track to achieve them. If you have not done it, what better time than the start of the year to get on the right track.

7) Hire professional help if DIY does not work for you
People often shy away from hiring professionals for managing their financial affairs. Reasons could range from lack of trust, perceived high costs to even ego and ignorance. Fact remains that if you do find the right advisor, the benefits can far exceed the costs you may have to incur. If “Do it yourself” strategy has not worked in the past for you, it may not work in future either. Shun any preconceived notions about finance professionals and look for someone who fits the bill for you.

As we approach 2017, let us vow to make our family and ourselves financially secure. In addition to working on your wealth, work equally hard on your health. Leave the demon of procrastination in 2016 and start 2017 with the energy and will to accomplish the undone.

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