8 New Year resolutions for a financially successful 2015
Most of you would have made some plans for the upcoming New Year's Eve. We all wish to welcome the year 2015 with happiness and joy in our hearts. However, it is necessary that we also work hard in the coming year to improve our financial health and to come closer to achieving our dreams and ambitions.
PersonalFN has listed down some resolutions which all of you must adopt to achieve financial success.
PersonalFN is of the view that if you sincerely adopt the above mentioned resolutions, then your dream of living a stress-free financial life can easily become a reality.
- I will be well prepared for emergencies
Some emergency situations such as loss of job, medical emergencies and so on can lead you to break your investments. Hence, it is imperative to maintain some contingency reserves (minimum 6 to 12 months of your expenses) in a savings bank account or liquid fund. These contingency reserves should never be used for meeting any unimportant expenses or bills and should be reserved only for unforeseen circumstances.
- I will make a list of all my financial goals
Metaphorically speaking, unless you know where you are headed, you won't get there. Hence, it is important to make a list of all the goals that you wish to achieve. Also, involve your family while undertaking this activity as their inputs and support will be extremely imperative in setting and achieving your goals. Please remember, simply listing down your financial goals is not enough. You need to determine how much money you would require in today's terms to fulfill your goal; and what is your time horizon for achieving them. Thereafter, calculate the future value of your financial goals, after taking into account a realistic inflation rate. In short, make sure that your goals are S.M.A.R.T - Specific, Measurable, Adjustable, Realistic, Time Bound.
- I will chalk out a suitable asset allocation pattern
Once you know the amount of corpus you would need to achieve your goals, you must chalk out a suitable asset allocation pattern. Asset allocation refers to distributing your investible surplus across asset classes such as equity, debt, gold, real estate in a pre-defined proportion. This is important as it may help you earn adequate returns, minimise your risk and taxes, have sufficient liquidity in your portfolio and also help your investments align as per the time horizon of your financial goals. Once, your asset allocation pattern has been determined, you must calculate the amount that you need to save and invest per month to achieve your financial goals (taking into account a realistic rate of return on different asset classes). Also, keep reviewing your asset allocation pattern from time to time to make sure that you achieve your financial goals in time.
- I will review my existing investments
Before making any fresh investments to achieve your objectives, you must review your existing investments to analyse if they are well suited to your risk appetite and financial goals. This will also help you understand the amount that you need to invest further for the fulfilment of your financial objectives. Remember that, making ad-hoc investments or keeping unsuitable products in your portfolio can harm your and your family's long term financial well-being.
- I will take informed investment decisions
You must make sure that you never invest in any investment product randomly on the basis of incomplete information or just because everybody else is investing in it. Remember that, every individual has a different risk taking ability and different time horizon for investments. Moreover, PersonalFN is of the view that a research oriented unbiased approach should be adopted every time you make any investment.
- I will adhere to my expense budget and keep my debts in check
You must create a budget for all your personal and household expenses and make sure everyone in the family sticks to it. This is extremely important if you wish to fulfil your dreams and wishes in life. It is also necessary to keep your debts in check. Remember that using credit cards or opting for loans is not bad as long as you have the means to service it. If your habit of spending extravagantly lands you in a debt trap, then it would be extremely difficult to meet your financial goals and keep your financial health in pink.
- I will protect the future of my family
If you are the only earning member in your family, then the financial future of your family is dependent on you. Hence, it is extremely important that you analyse whether you have a suitable insurance policy and have adequate insurance cover that can take care of the needs of your family in your absence. If not, then it may be a high time for you to cover yourself adequately with a Term insurance policy. At PersonalFN, we believe Term insurance policy is the best option for safeguarding your family's financial future and thus you should never mix your investment and insurance needs. It is also important that you and all the members of your family are covered with a suitable health insurance policy as medical expenses can burn a huge hole in your savings.
- I will take the help of a financial planning expert if I need to
If you can determine a suitable asset allocation pattern, review your existing investments, decide on where and how much to invest, take an adequate life and health insurance policy etc. all by yourself, then you don't need the help of a financial planning expert. However, if there are any of these things that you can't do yourself, then you definitely and immediately require the services of an unbiased and qualified financial planner. Remember, that it won't do you any good to be penny wise and pound foolish. In other words, don't let the fees charged by the planner deter you from availing his or her services.
PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.
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