Tuesday, April 17, 2012

What’s your Financial resolution this year!


   Every ‘New Year’ brings in a lot of joy, excitement, freshness and hope. Past is forgotten and fresh start is made. New Year resolutions are self commitments in the hope of living a better life. The resolutions like living healthy, reducing stress or spending more time with the family show the importance of various aspects of life for us. Personal finance is also one such aspect which needs determination, patience and constant efforts in order to help you live a happier life.
So why not take a financial resolution this year and be more confident? Let’s take a look at some of them.


1. Define your goals:Will you try to go on a vacation without deciding the destination? Probably never! The thought of having a miserable experience intrigues you, but you may be saving and investing without defining your requirement.
If you wish to get the best higher education for your child, consider it as a goal. Try to qualify and quantify it further by listing down the colleges you wish your child to take admission. Then, detail out all kinds of related expenses like admission fees, tuition fees, boarding and lodging fees, and cost of travel. Also find out at what time and for what duration you would need the amount. You are ready to plan your investments with the goal.
A resolution to define the goals will help you avoid haphazard buying of financial products. It will save you from some very miserable experiences financially.

2. Prepare a Budget:Have you ever wondered as to why your credit card statements show bloated figures? Almost always! Although the conviction of being a careful spender is ingrained in you, but you may still find it difficult to limit your expenses.
You may want to start this year by making an annual budget. List down fixed non-discretionary expenses like rent, EMI, maintenance, school fees, domestic helps salary, driver’s salary for a month. Add to it the utility expenses like electricity bill, groceries, phone bills, petrol and the like. Further. add insurance premiums, SIPs, annual investments, festivals, clothings, vacations, partying. Also, keep aside some amount for medical and other incidental expenses.
Your resolution of allocating a defined amount for all the planned expenditure will, in a way, restrict your freedom on discretionary expenses. Might help you in cutting down on splurging. Your credit card bills may stop surprising you.

3. No overload of loans:Are you sulking under the burden of your house loan, car loan, education loan, personal loan, or home improvement loan? Quite considerably! You know that loan is just a convenient way of making something look affordable, which otherwise you can’t manage from your savings alone. In principle, you would agree that a loan is a loan is a loan i.e. a liability which must be paid off sooner or later.
Bury the charm of buying everything with the help of a loan, instead avail it only when absolutely necessary. For example if you are planning to buy a car ensure that you can pay at least 40-50% of it from your savings. In addition to EMI, there will be a lot more expenses like maintenance, fuel, insurance and servicing. More expensive the car, more will be these expenses.
A resolution of staying away from unnecessary loans can save you from unwanted interest burden.

4. Get your financial house in order:How many times in a year do you go through all the investment documents, insurance policies, loan documents, high item bills, warranty cards? Hardly! You may realize the importance of doing it but still never end up actually spending time on it for some reason or the other.
Buck up for a monthly exercise of consolidating all financial papers. Start with reading fine prints and details of all the documents. Look for inaccuracies in name, address, phone numbers, nominations, maturity amount and maturity date. In case of investments, note down the current value, maturity date and surrender value along with tax implications, if any.
A resolution of going through your financial papers once in a quarter will help you track and monitor your financial house. Also take timely necessary actions if required

5. Never delay your financial decisions:Can you end a day without replying urgent mails or reverting important phone calls? Unimaginable! You will never dream of postponing your office work but very likely will keep delaying your personal finance decisions. It’s time to prioritize and give necessary time to your personal finance.
There is always an appropriate time for most of the financial decisions. For example, if you delay the decision of buying life insurance, every year added to your age will increase the premium by a considerable amount. If you plan for your vacations well in advance, you might negotiate better deals for logistics and stay.
A New Year resolution of never delaying financial decisions will help you save more and will prepare you better for any emergency.