As we bid good bye to 2017 and usher in a New Year, it is also the time for resolutions. Hardly a year passes without you making some serious financial resolutions for the New Year. The question is how many do you actually live by. For a change, this time around, let us seriously look at some meaningful financial resolutions for 2018. The idea is to take that one important step towards getting your finances in order. Remember, you are never too young or too old to make meaningful financial resolutions and living by them. At the end of 2018, you will certainly have a feel of gratification at a job well done. Here are 10 New Year money resolutions..
Get your finances in shape, administratively. Yes, the focus is on the word administratively. If you sat down to document your policies, your investments, your bank accounts and your credit cards, you will realize that you have more than you can handle. Do you really require such an administrative nightmare? The answer is; you don’t! So resolve to cut down on your plethora of cards, bank accounts and policies and consolidate them into a handful of manageable items.
Reduce your high cost debt. That is a resolution you make but never live by. This is not to suggest that you stop spending altogether. But prioritize debt reduction over a lot of other allocations this year. If you have high cost debt like credit cards or personal loans then use your year-end bonus to reduce a part of this high cost debt. You will be saving a really tidy sum!
Evaluate your insurance needs zero-up. What do we mean by zero-up? Most of us tend to look at our insurance needs on an incremental basis. So, each year we add a bit of insurance and feel pleased about. How about thinking ahead by 10 years and envisaging the changes to your insurance needs. Better make a substantial increase in your term cover this year itself. You always thought of doing a zero-based assessment of your insurance needs but never got down to it. This is the year you should actually get down to doing it.
Reduce your dependence on cash. Even before the government started its focus on digitization, we all knew about the merits of digital money. Cash has a huge cost like transacting, maintaining, ensuring safety etc. You can avoid all that. Ensure that all your bills from your milk bill to grocery bill to your household help will be paid digitally only. With the spread of debit cards and Paytm, it is not all that difficult. You will also be encouraging others to go digital.
Seriously embark on a financial plan. You would have most certainly embarked upon it if you are already in your late 20s or early 30s. In case you haven’t, this is the year you should start off. You are never too early or never too late. Get to grips with your finances and you will realize that many of your dreams are actually a lot more practical and achievable than you originally thought.
Get into the habit of forced savings and forced investing. Be it saving or investing, it is not enough to just plan. In fact, you have to force yourself to do it and that means building a discipline of saving and investing into your monthly budgets. Look at savings as a target rather than as a residual. You will be surprised that you actually have a lot more investable surplus than you imagined. Above all, don’t let your money idle in a savings account in a bank. Buy returns by taking calculated risks. That is the way to do it in 2018.
Focus on wealth creation; that is what ultimately matters. At the end of the day, it is only wealth creation that gets you closer to your goals and it is only equities that will help you in wealth creation over the longer run. Debt can give you security and can generate returns up to a point. But it is equities and equity funds that will generate returns through the power of compounding consistently year after year. Get into the equity habit this year; there really is no option!
Make your money work a little bit harder for you. Are you really doing it? Are you making full use of all the assets that you have? Are you sure about your risk tolerance? Should your equity exposure be 60% instead of 50%? This can make a huge difference to your eventual wealth. Most of us can only sustain up to a point on the strength of our efforts and skills. After a point, you have to make money work harder for you. Let 2018 be the starting point for you.
Plug the leakages in your budget. There are enough budgeting apps available. You may be surprised to realize that you spent more on medicines than on food and more on eating out than on nutritious home food. Cut these flabby expenses. They add nothing except calories to your lower abdomen. You need to enjoy life but meaninglessly spending in an unhealthy lifestyle is just not worth it. There are many more such budget leakages you can effectively plug in 2018.
Finally, start drawing a Worst Case Contingency Plan (WCCP). OK, here is a caveat! You do not need to take this point very seriously but just think about it. What happens to your portfolio if equities corrected by 45% in this year. Theoretically, it is possible because it happened in 2008. While you need not worry, start creating a back-up plan!