Expert advice

Dec 28, 2015,11.37 IST

How to do better with our financial resolutions in 2016

Nitin Vyakaranam
ArthaYantra.com

We almost arrived at end of the year and this is the time when many of us make new year resolutions to lead a better life than earlier. However, resolutions are taken seriously at beginning and slowly overlooked. The key to keep the resolutions is perseverance. So, this new year, if we have resolutions that concern our personal finances, there’s no better time than to start now. Before we get started, it is good to keep below things in mind in order to do better with our personal financial resolutions in 2016:

Draw a timeline

As years pass on, priorities of our lives change. Our requirements take new shape; our expectations get better from before as reality continues to refine them. So if our resolution is to prosper financially, drawing a timeline for our goals is necessary. Detailing our goals will help simplify the execution. We’ll not be stuck at the end moment, confused, not knowing what to do. For example, one may start with short-term goals like buying a car, buying a home, and then other long term goals like retirement.

Don’t set high expectations

“Aim for the stars and you can reach the sky.” Really, this is motivating indeed. But when it comes to our hard earned money, we can’t take any chance and we must be as practical, specific and realistic with our goals. Imagine the feeling when one has aimed for a holiday in Paris and but ends up in Patna. Well, on a serious note, our expectations should always match our current cash flows instead of our future income. Setting the right expectations will reduce financial stress, and avoid wear and tear of our emotional selves.

Put a rank to the need

Prioritizing our goals is an easy way to achieve our goals. It will be too much to expect too many goals fulfill at the same time. For example, one may want to retire early but cannot save for it as the immediate requirement is a car. We have a tendency to fall for instant gratification and compromise our future goals for it. But if right priorities are set before hand, it would be easier for a person to understand where they stand and how possible it is to achieve their financial goals.

Have patience

“Rome wasn’t built in a day.” Once the seeds are sown, the wait is for years for the tree to grow and withstand bad weather. It is the same thing with our savings. When we invest, we must have the strength to resist quick returns. It is true that markets are volatile but eventually one can earn wealth only when he/she has passed these uncertainties. For example, if you have invested in large cap funds, it won’t be ideal to suddenly withdraw it than to stay with the fund till it gives the expected returns.

Diversify properly

Apart from prioritizing financial goals it is also important to diversify assets properly to achieve those set goals. Many of us either over diversify or under diversify, which lead to financial liabilities going forward. So, it is important to have knowledge on where your invested fund would take you before investing your hard earned money.
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