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Personal Finance resolutions for New Year


Happy New Year !!!

January is the month of resolutions. Most people make New Year’s resolutions focussing on physical fitness. At the same time, keeping eye on your financial health is very important. So here are financial resolutions you should make for this new year.

1. I will prepare a master list of all my financial assets

Prepare a list of all your investments (shares, mutual funds, NSCs, bank FDs, bonds etc), DMAT accounts, insurance (LIC policies, ULIP, health insurance etc), loans, etc.

To start with, write down all these data into an excel file or physical diary including details like document number, expiry date, agent contact etc.  

Check and update the correct the communication address, phone number, email ID, nomination details for all your assets.

Keep original documents in a safe place. Also, keep 2 set of photocopies of investment documents in separate place. Share the financial details with your spouse so that he/she is aware if you are not there.

2. I will prepare income, expense tracker

Are you one of those you say at month end – “I don’t know where all my money goes”?

In that case, you should prepare an excel file to track your daily, monthly & annual expenses. Review and identify which expenses could be avoided or delayed.  You should aim to save at least 25-30% of your in-hand salary.

3. I will create an emergency fund

Keep aside an amount equal to at least 3 months monthly expenses. It is best to open a separate bank account and keep this money in regular Savings account, Sweep in FD Account (earns interest more than normal savings account) or Liquid Fund. This can be used in case of any medical or other emergencies.

4. I will review my insurance

I am sure everyone has/ had an insurance policy from LIC either taken by themselves or parents.   Traditionally LIC products were used for tax benefits and savings. However, the sum assured on such policies are normally quite less.

Forget ULIP and Buy a Term Insurance plan for at least 5-6 times annual salary.

5. I will get basic knowledge of finance and investment products

You need not be a financial wizard to understand basic financial stuff. So gear up and get some basic knowledge of investment products, risks & returns. It will help you manage your money in better way. You can then ask right questions to your financial advisor and take informed decisions.

6. I will start investing in Equity mutual fund

In past, many people have lost money in share market and are afraid of investing in it. There is a perception that share market is very risky.  

Yes, you will loose money if you just invest in penny stocks, based on tips by brokers to make quick money or without proper research.  But if you invest in disciplined & systematic way, the long term returns will be higher than traditional fixed income products.

The best way is to start investing through Equity Mutual Funds, Just start with Rs 1000 monthly SIP in a large cap mutual fund, say “HDFC Top 200 Fund”. It is not a large amount and I am sure after few months you will ask – “Which are other good funds to invest in?” Read my other post on – Top 10 reasons to invest via Mutual Funds.

7. I will transfer my PF balance

Did you transfer your provident fund (PF) account to your new employer when you changed your job?  If No, then you should start the process to transfer your PF balance to the new employer.  Note that after 3 years of non-contribution, the old PF account will be treated as dormant and no interest will be credited.

8. I will pay all my dues on time

Pay all your dues – electricity, mobile, broadband, credit card, loan EMI etc on time and avoid penalty charges or interest.  Not paying dues on time may affect your Credit rating going forward.

9. I will not take too much debt or over spend on credit card

Spend only what you can afford to pay on time. Don’t overspend using credit card thinking that it can be paid later. The interest rates on credit card will push you in a debt trap. If you can’t afford, postpone your spending to the next month. Don’t take more than 2 credit cards.

10. I will not upgrade to new gadgets blindly

Don’t upgrade gadgets just because there is a new version in the market. Check if you really need those new features otherwise stick to the existing version.

11. I will check my CIBIL report & score

If you are paying loans, credit cards etc, it is advisable to check your CIBIL report & credit score once a year or at least before applying any new loan. If you notice any error, get it rectified asap.

12. I will open a PPF & NPS Account

Open a PPF account, if you do not have one. See my post on PPF Account & its features & tax benefits.

Also, the New Pension Scheme (NPS) is a good low-cost investment option for retirement.

13. I will review & monitor my resolutions every month

Making resolution is the first step and working towards it might not be easy. So remind yourself every month about your financial resolutions and check if you are on track or not.

Please comment what other financial resolutions have you made for this year.

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