10 simple financial resolutions that will make you richer in 2013
Resolutions are usually not worth the piece of paper they are written on. One makes them and quite promptly pushes them aside when real life intrudes. The usual excuses apply – it is not possible to continue doing this, I do not have the time, it costs too much money etc. However here are some very simple and effective financial resolutions that aim at making you richer.
1. I will increase my financial literacy
While it is important to take help from professionals, its time stop depending blindly on others for advice. Be a smart investor and take responsibility for your financial decisions. To increase your knowledge, attend seminar, read a book, read blog, ask questions to experts…..
2. I will actually throw out the deadwood from my portfolio
Every investment portfolio has some investments which has either been losing value or showing no growth or returns. Sell off and book losses if you have to; stop deluding yourself that a share that has been inactive for last 5 years will suddenly come to life.
3. I will assess my insurance needs
Life is constantly transforming itself. Every year your income and lifestyle see some changes. There may also be fresh additions to the family. All this means you need to reassess your insurance needs. Roughly, life insurance should be 6 times your annual income. Health insurance must cover all family members and remember even if you have health insurance benefits from your employer, it make sense to have a personal policy.
4. I will convert savings into active investments
While you are working hard for your money is your money working hard for you too? The inflation rate in India is nearly 10%p.a. and your investments must earn a return higher than 10% so that your investments are not depleting in real value. Do not keep money idle in saving account to earn a mere 4-5% or even in a fixed deposit where it will earn a maximum of 9%. Investing in well selected equities is the best way to beat the inflation monster.
5. I will not invest in a “hot tip” without doing adequate research
How many times we have burnt our fingers with the “hot tips” that we get from friends and family. Be smart and make Google your best friend. Research the investment and the sector, ask tough questions (the toughest will be – why are the returns abnormally high)
6. I will analyse one bill a month and try to find ways to reduce that expense
We pay our bills blindly, often utility bills are paid with an auto debit facility and we never really see the bill. Take time to analyse one different type of bill a month i.e your electricity bill one month, mobile bill the next etc and try to figure out where you are spending excessively and try to bring down that expense.
7. I will develop good financial relations
We do not live in a vacuum, during our financial transactions, we interact with several people, our CA, broker, banker, financial advisor etc. Try to develop good relationships with people who can help guide your financial well-being. Get to know them better and pay attention to what they have to say. In this way, they are more likely to go the extra mile to provide the kind of personalized service that can help keep your goals on track.
8. I will make a will
No matter what your age, if you hold any financial assets you must make a will. Remove any negative thoughts from your mind. Like insurance, making a will is an investment for the peace of mind of your loved ones.
9. I will do my tax planning throughout the year
Investing in tax saving instruments is a simple exercise, yet most of us leave it till the last minute and then scramble to invest. Do invest as and when you have some extra funds to avoid tax worries.
10. I will donate to charity
For most us, good intentions often do not translate into action. Do put aside money for charity not from what is left over after expenses (there will rarely be anything left over), but from your income at the beginning of the month. Giving to the less fortunate only magnifies our happiness, after all why do we work so hard if not to be happy.
Making your resolutions stick
The toughest part of a resolution is to make it stick. To make sure the resolution become a reality follow some rules
- Keep the resolution simple – easy to understand and follow
- Understand all that the resolution will involve – for instance if you are resolving to increase your insurance cover, it involves an additional outflow from your budget. Get a few quotes online to know how much and then make the resolution
- Quantify the resolution. Finance is all about numbers, so try to quantify your wishes. If you wish to reduce your home loan outstanding, by how much do you want to reduce it, how will you get the lumpsum for repayment and how will it benefit you.
- Give it a reasonable time line. Be kind to yourself and do not set unrealistic expectations.