A few days from now 2019 will come to an end and we would step into a new year replete with possibilities and opportunities. While most of us are already ready with our list of resolutions to improve our physical, mental and professional well being, more often than not we leave out making financial resolutions and take unplanned wealth decisions. This leads to unnecessary money drain and last-minute investments in suboptimal avenues. Well, it’s time to change that! It’s time we focus equally on our financial wellbeing and sow the seeds now for a cushioned future. So here are Top 5 New Year financial resolutions that you need to jot down in your reflection journal right now to make for the wealthy 2020. Read on!
Resolution # 1: I Will Be Conscious About My Spending Habits:-
If you are someone who is clueless about where his money went and repeatedly find yourself staring at a dismal bank balance, it’s time to exercise financial discipline. Here’s where the famous rule of budgeting, the 50-30-20 rule can come to your aid. This simple rule tells you to divide your post-tax salary in such a way that 50% is spent on needs which are the bare essentials like food, rent, clothing, maintenance, etc. 30% is spent on wants like the occasional movie outing, shopping, travel, hobbies etc and the remaining 20% of the money is saved and later invested.
Going by this rule, you would be able to discern the right use of your money and bring a certain amount of discipline. Nowadays, there are so many apps available in the market that you can use for smart budgeting. You don’t have to deprive yourself of all the goodies that money can buy, but be judicious with your purchasing power. Just pause and think before you buy something; is this an impulse purchase or do I really need it? Whatever it takes, stick to the 50-30-20 rule as much as possible. This mindfulness regarding your money will make you feel empowered and in control of your financial life.
Resolution #2: I Will Not Delay Investing
As soon as you master the first resolution, you should jump on to the next important one, that is, investing to plan for the future. Your long term goals like retirement need you to plant the seed now. This essentially means you need to stop waiting for the best time to invest. With each year you delay, you stand to lose a lot in terms of wealth creation opportunities. Select the right investment avenue for yourself that offers inflation-beating returns and consequently better wealth creation prospects.
If you are 25 and want to retire by the time you are 45-50, then invest in a diversified equity portfolio now. Investing in equities in the long term via the SIP route will leverage the power of compounding and help you accumulate a healthy corpus. Platforms like Groww have made investing a cakewalk, by removing all entry barriers that would have stopped you before. So make use of such facilities and don’t wait for the right moment. Start small via the SIP route to begin investing. For instance, if you are not sure about other funds, you can start with tax-saving ELSS funds.
ELSS funds are a great way to help you save taxes as well as help you get initiated into equity investing. Thereafter, as you get your hands on investing and gain familiarity get more familiarity, you can start with other equity funds. Similarly, plan for your short term goals like building an emergency corpus to meet financial contingencies. You can do so by investing in liquid funds that allow you quick redemption facility coupled with better returns than a savings account. Act now, your future self will definitely applaud you for your timely action and prudence.
Resolution #3: I Will Reduce My Debt
Be it student debt or credit card debt, this year strategize how to combat debt. If left unchecked, debt can become a wealth swallower. Especially, if you have been ignoring your high-interest rate debts like credit cards, its important to take action before you land into a debt trap. What you should do is make a list of all ongoing debts and loans you have and arrange them according to the interest rate they accrue in descending order. For instance, plan ahead to clear off your credit card debt in one go. Similarly, you can direct resources to other important debts when you get a salary hike or a yearly bonus so that they are reduced faster. Going forward, avoid indiscriminate use of credit cards. Keep the debt levels in check and it will save you a lot of stress.
Resolution #4 : I Will Become Financially Literate
The key to making empowered and informed decisions about your money is to become financially literate. The more you educate yourself about the best ways to grow wealth the more equipped and in-control you will be. The first thing to do is to read. Educate yourself about the various investment options there are. Get familiar with investment jargon. Read books of famous investors, listen to money podcasts, stay abreast with the latest happenings in the world of finance and economy, check out the various financial management tools. In short, don’t shy away from learning about effective ways to grow wealth and be fully aware of the risks and rewards associated with investing in certain avenues. This will empower you to make prudent financial decisions.
Resolution #5: I Will Invest In Myself
Invest in yourself to upskill yourself in the field you are. It may seem counterintuitive, but spending money on yourself can ultimately lead to better job prospects as well as open doors to create alternate sources of income. So the return on investment would be high if we look at the long term wealth creation prospects of upskilling ourselves. So go ahead, do that short term skill enhancement course you have been hesitating to take.
To Sum Up
Apart from the ones mentioned above, make sure you have adequate health and term insurance cover as well as have an emergency fund with an amount worth six months of expenses. This will ensure your other resolutions don’t suffer and your family is cushioned financially. And finally, believe that you would be able to achieve all of these goals. At the same time, don’t be too hard on yourself if you are not able to finish any goal completely. The seeds you sow for your financial well being this year will bear very sweet fruits in the future for you to enjoy.
Happy Investing And A Happy New Year!
Disclaimer: The views expressed in this post are that of the author and not those of Groww