By Lovaii Navlakhi, MD & Chief Financial Planner, International Money Matters
The New Year is a beginning- a fresh start to life, a renewed attempt to achieve what you want from life. Financial resolutions should form a part of your new year resolutions because if your life is sorted out financially, the rest comes easier. So here’s what you can do to get started.
- Create an emergency fund. Put aside 3 months of monthly expenses preferably in a liquid fund (so that it earns more return than a regular savings bank) or in a savings bank account, so that at times of such distress, you are not running around helter-skelter, seeking loans, or withdrawing cash on credit cards. Build this up slowly with regular inflows from monthly savings or with a part of your annual bonus.
- Create a master list of your financial data – assets, investments, loans, insurances policies etc. and share it with your spouse. Add name and contact info of agent, advisor or representative against each of these entries. File and label the relevant documents. Look at it from the perspective of your spouse trying to understand the financial situation in your absence. Keep the original insurance policy documents in your locker, with copies of these and other important documents with your spouse and a trusted relative, friend or your legal/financial advisor. Get your nomination, bank details and contact details – address, telephone numbers and email ids; updated for all of your assets and investments.
- Resolve to use the credit card sparingly. Spend only what you can afford to pay in a single shot when it is due. Check your credit score at http://www.cibil.com/credit-score and see if it is accurate.
- Equity markets outlook for 2013 is promising. Take advantage of that through SIPs (Systematic Investment Plans) in mutual funds to create wealth. It is the best way to take advantage of growth in the economy while avoiding the volatility which characterises equity markets.
- Review your insurance cover and get it up to date. Life comes with very few guarantees. Imagine you were no more tomorrow, and think of whatever you have planned for your family, your child, the basic living style of your family. Will all of this need to be sacrificed if something fatal happens to you? Don’t look at it as, I pay premiums continuously and get nothing in return – what you get with a pure insurance plan protecting your future income is peace of mind that your family is secure. Isn’t that reward enough?
- Get financially savvy. The world of finance can be intimidating; so much so that many otherwise intelligent people disregard important expenses, fees and information due to lack of knowledge. While you may not get to be an expert, knowing different kinds of investments, the factors that affect them, the operational technicalities, understanding the risks you face etc. will enhance the care you give to the financial details of your life. So educate yourself and take empowered decisions.