The first step towards happiness is being stress free. And well-managed finances have the tendency to lessen atleast half of your stress. But remember, only making resolutions isn't important; you will have to stick to them too.
The year is coming to an end, and it's time to celebrate and welcome 2016. It's also the time that we pick up new resolutions each year, and strive to achieve them. This is also a great time to take up some financial resolutions too.
The first step towards happiness is being stress free. And well-managed finances have the tendency to lessen atleast half of your stress. But remember, only making resolutions isn't important; you will have to stick to them too.
There's a need to set up clear financial objectives along with flawless execution. Here are some tips and tricks to get your financials right this
year.
Review of your financial performance in 2015:
It's time to introspect and for some self-appraisal. Ask yourself these questions.
-- Did I accomplish my financial objectives?
-- Was my income & total expenses, both, expected and unexpected?
-- Did I pay my EMIs/dues in time or were there any late payments, if any?
-- How much returns did I make on my investments; did I exceed my target?
-- Did I have any surplus money which was lying dead in an account?
-- Did I touch my emergency fund or did I even create one?
-- Did I borrow any money and, if yes, then for what purpose?
-- How did I perform monetarily in 2015?
Doing this self-examination will give you answers to set up your new year targets to accomplish your financial objectives.
How to set your financial goals and make resolutions for 2016?
Resolutions for 2016 should be based on the review of the past year's financial performance. Here are some examples
-- “I will strictly follow my budget.”
-- “I will pay my EMIs/liabilities/credit card payments on time.”
-- “I will optimize my tax saving investments.”
-- “I will save 20% of my total income.”
-- “I will start SIPs and also invest in new ways of investment than traditional ways”; and so on.
Here are some goals you can set for 2016 for financial peace
Know your financial health: Yes, the first important step is to analyse your financial fitness, and check where you stand in your financial life, followed by a detailed plan with your proposed income, savings and expenses in 2016.
Prioritise your expenses: There are expenses which are unavoidable and unnecessary, and you need to prioritise between your essential and luxuries by separating the two, finding the gaps and deciding what expenses you can cut.
Review and reduce debt: You can reduce your debts that has a higher rate of interest and gives a flexibility for prepayment or closure. However, it is important to always optimise your debt wherever possible, like in case of a home loan which also offers tax benefits so that the overall cost of serving this debt can be lowered down.
Make a monthly and annual budget: Prepare a monthly budget and annual budget, factoring in the details of expenses and income. Review the budget on a monthly basis; following strict execution is the only key to success.
Emergency corpus: If you don’t have an emergency fund, making one should be your first step in 2016. If you already have an emergency fund, make it stronger this year.
Pay your dues on time: Make sure you don't end up paying any penalty for late tax payments or EMIs or credit card payments, this year. You can ensure this by making a due date diary, set reminders on your phone. Whereever possible, it is advisable to set up auto debits for these payments.
Save more; save big: Strive to make it big this year; increase your saving percentage and create a handsome corpus for the future.
Systematic investment planning: Dead investments or savings with minuscule returns are a deterrent in creating wealth. Make a proper investment plan; diversify your portfolio. Calculate your needs, risk appetite and categorise you investment as follows:-
-- Tax saving investments
-- Life, mediclaim, general insurance policies
-- Mutual funds, stock market investments
-- Traditional investments
-- Retirement planning
-- Child education related investments
Joy of giving: Each one of us owe something back to the society. Every new year, you can take a pledge to contribute for the wellbeing of the society by giving away some part of your earning as well as time towards social upliftment.
Additional income source: Why not consider of an additional source of income this year? It can be a hobby or a skill which can help generate that additional income.
Savings and smart investments are simple steps to create long term wealth and assets for securing your future. So make your yearly finance plan soon, and be stress free to welcome 2016 with a financial bang. Happy new year!
Rishabh Parakh is a Chartered Accountant and the Chief Gardener & Founder Director of Money Plant Consulting, a leading Tax & Investment Planning Advisory Service Provider. He also runs a personal finance blog called “Mango Investor” aka AAM Niveshak at www.mangoinvestor.com. Readers are invited to send their feedback to rishabhparakh@moneyplantconsulting.net.
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