Today, 1st April marks the beginning of financial year 2016-17 and this is the time to take resolutions and to pledge for something better. This time, you should resolve to revisit your financial practices and strive for a better and secure future ahead. So, as we start the A2Z of Personal Finances, let’s talk of ‘Annual Financial Resolutions’. Here are five financial resolutions one must take for the year and life ahead:
1. I will pay off my higher rate debts
In a country where personal loans and credit cards bills are easily available on EMIs, we generally get trapped in debt and the interest cost adds to our monthly expenses. However, we don’t pay much attention to high-rated personal loans and credit card EMIs and we end up paying interests in the range of 15-24% per year. So, it does make sense to list down all our debt and ensure to pay the higher rate debts at the earliest opportunity.
Those on top of the list, which in all probabilities shall be your credit card should be paid off immediately. So, make sure that before you invest any money, the rate of returns is higher than the debts outstanding. For example, If you owe Rs. 10,000 on your credit card and pay 18% interest annually (Rs. 1,800 per year), while at the same time, have also invested Rs. 10,000 with a 9% fixed deposit in a nationalised bank (Rs. 900 a year), one is able to actually save Rs. 900 a year by just paying the debt.
2. I will make monthly budgets
India is a country where expenses are prioritised before savings and people generally tend to save only if anything is left after our monthly expenses. Rather, the approach should be committing a minimum percentage towards savings and then allocating the balance income towards our monthly expenses. Let’s resolve to limit our expenses by making monthly budgets so that we know precisely where our hard-earned income is going. We shall also talk about budgeting in the coming posts.
3. I will invest in a Systematic Manner and not in March Next Year for Tax Saving
Many people in my phonebook contact me in March to guide them for tax saving instruments. However, the shortage of time generally restricts the options available and hence, they end up investing in the instruments with lower returns. Further, lump sum investment at the year-end strains the finances during that period too.
Instead, plan for the savings in the beginning of the year itself and therefore systematic investments should be the first basket monthly income should go to. These small investments don’t make much difference on monthly basis and thus releases the pressure on the last months to save tax.
4. I will maintain an Emergency corpus
It is basically getting prepared for not-so-good times. It is considered financially wise to have an emergency corpus of around 6 months’ expenses and if you don’t have not yet created an emergency fund, making one should be your first step in this financial year. We shall discuss an effective way of creating and maintaining emergency corpus when we talk of Liquid Funds in the coming posts.
and last but not the least,
5. I will keep my financial resolutions
It is a fact indeed that majority of the resolutions are generally just for the day. Making and keeping resolutions are altogether two separate things. And I resolve that I will keep my financial resolutions for this year and for the rest of my life.
What is your financial resolution? Have a healthy financial life ahead.
Check out the A2Z of Personal Finance here.