Every now and then we all need a jumpstart to our financial goals, and what better way to do this in a fresh year with a fresh start?
Given the fact that less than 33 percent of Indian women make their own financial decisions, finding easy and committed ways to ramp your savings is always something you want to look out for, whether you fall in this category or otherwise.
Not only does having investments help you navigate unplanned life situations, but it also gives you peace of mind about your money.
And, who better to understand financial peace-of-mind than women like us? But, if you haven’t started this already, there isn’t a better time than now.
The year 2020 began with great optimism and zeal. New Year, a new decade! But, as we all know, that was short-lived. The world soon faced one of the worst phases it has gone through in the past century.
With this came the glaring importance of having a set financial plan. People started looking at money very differently, especially women.
Having a clear plan and diligent investing provides that extra boost of motivation to cope with any bad financial situation - and to ensure that existing financial goals don’t take a hit.
In January 2020, Janhvi, a 29-year-old advertising professional decided to start saving once she got her bonus in May 2020. She wanted to do so after taking a holiday in the first quarter of the year.
Jahnvi had purchased a car in late 2019 considering the discounts available and started servicing a loan on her car. After a great holiday in Indonesia in February, some accumulated credit card debt, and a loan to service, Covid struck with all its might.
Before Janhvi knew it, her bonus had been indefinitely deferred and her company had announced a 30 percent salary cut across the board. Sounds familiar?
Well, Janhvi’s is not an isolated story. We often defer savings and investments and promise ourselves that once we are done with that experience, purchase or splurge, we will start investing. It can happen later.
Unfortunately, if there’s one thing that the pandemic has taught us is that things don’t always go as planned and it’s only smart to be prepared.
But, we don’t want to scare you. If you’re now thinking about how to get this plan started, don’t worry, we’re here and we’re going to tell you everything you need to know.
Let’s discuss some of the financial resolutions that can lead to peace of mind in 2021. Here goes:
1. Health Insurance, I’m coming for you.
We can’t stress enough the need for adequate health insurance. This should not be considered optional - COVID or not. Relying only on your employer providing insurance may be a terrible idea.
Deferring that policy purchase until something happens is worse. As women, it is also important to make sure that besides health insurance, we are also creating funds for medical needs that may not be covered by our policies. For instance, reproductive processes.
A nominal premium usually yields a cover that can give you great peace of mind. First things first, get yourself that health insurance. A good amount of coverage is Rs 10L for an adult.
2. Breaking up with debt. It’s not you, it’s me!
Do you see yourself going towards a debt trap? Credit card debt, a personal loan, a loan for your car, EMI payments for your home? Prioritise bringing down your liabilities, especially if the rate of interest on your loans is more than ~10 percent.
It is important to compare whether an investment will help you beat the interest rate of your loan if it won’t bring down that debt.
3. Budget. I’m going to do it, before the finance ministry does.
Budgeting and cash flow management are terms we are all too familiar with. However, we do tend to delay, defer or are just inconsistent with this.
Whether it’s the cookie jar method, the 50/30/20 budget or a really simple journaling method like Kakeibo, track your expenses for the first quarter, and you will be surprised at how some of the expenses you thought were important really aren’t.
For instance, if you look at your bank statements for January through March of 2020 and compare it to the rest of the year, you might see that your spending has come down, and you know what, you managed really well without those expenses. Focus on the essentials.
4. Long term investments, you’re my favorite!
Empires aren’t built overnight, and nor is your financial fitness. If you want to be financially secure, you need to have a long term game plan.
The power of compounding is magical. The longer you keep even a small amount of money invested smartly, the higher returns it shall yield.
1365 = 1
(1.01)365 = 37.7
Small consistent efforts and investments pay off!
5. Life protection, because I love my family.
What happens to your loved ones if something happens to you? Is this a thought that keeps you up at night? Think about it. When you have dependents and they have no clue how to manage their money and something happens to you, what will they do?
Again, the goal of this article is not to scare you. That wasn’t where we were heading, but a good life protection gives your loved ones that safety net (and you some peace of mind) so that they don’t need to break all your investments to cushion the jerk.
In conclusion -
Life is undeniably uncertain. Who would have thought that 2020 would witness a world-shaking pandemic that would change our relationship with money? But, as they say, something good always comes out of something bad.
So take this opportunity to start taking stock of your financial situation. Start saving and start building up strong investments. You need to make sure that your money is in order, it is safely invested and is giving you a decent return.
That way, you will ensure that come what may, you are future secure.
Cheers to a great 2021!
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: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.