Simple investments, health insurance, a will and more: 5 money resolutions for 2023

From promising to exercise every day to visiting a new destination or two, we make all sorts of resolutions at the start of the year. But taking care of our money is somehow not on the radar, because personal finance sounds boring, right?

The truth is, if your money matters are shipshape, you can do a lot more with life when it comes to spending on your desires and having a comfortable year ahead, financially, at least. Moneycontrol puts together five financial resolutions for you. Simple resolutions for a peaceful and joyous year ahead.

“I will stick with simple investment products”
When it comes to money management, boring is good.

On the back of the massive Covid-fueled  equity rally in India and around the world, many investors went for thematic and sector funds. But in 2023, things didn’t go as planned. First, towards the end of 2021, equity markets turned volatile over concerns about the US Federal Reserve (the Fed) raising interest rates as the world was showing signs of coming out Covid.

Then, in 2022, Russia invaded Ukraine and ignited a chain of events that triggered inflation the world over and led to interest rate hikes. Technology stocks in the US crashed. Sectors like banks & financials, auto, consumption, and infrastructure-related sectors did well in 2022. But technology, pharmaceutical, and healthcare funds disappointed.

Deepak Chhabria, CEO and Director, Axiom Financial Services, a Bengaluru-based distributor of mutual funds (MF) says: “Our experience shows that it is better to invest in simple and diversified investment vehicles, instead of the exotic. Look at what happened to mutual funds investing solely in China and Taiwan.”

Chhabria has a point. The Nippon India Taiwan Equity Fund fell by 33.29 percent in 2022. The Edelweiss Greater China Fund fell by 20.66 percent. US technology funds, the favourite of many investors in India who invested in them on the back of their stupendous run in 2020 and 2021, disappointed too.

That is not to say that sector and theme funds are bad. But, like Chhabria reiterates, focus on simple products. Only when your portfolio is adequately diversified, should you go for sector and theme funds, that too only to the extent to which you can tolerate the risk.

Also read | Confused which mutual funds to buy? Check out MC30; Moneycontrol's curated basket of 30 investment-worthy mutual fund schemes

“The last two years have been a crash course for investors. People didn’t really know how markets can behave in a stomach-churning life-event like a pandemic. Or a war,” says Kalpesh Ashar, Founder, Full Circle Financial Planners and Advisors. Ashar reminds us that markets can be the “complete opposite” of what we predict. He too stresses the need to stick with “simple products,” when it comes to investing.

“I will build a contingency fund and buy health insurance”
Ashar reminds us that as a financial planner, it has been tough to convince many customers in the past of the need to build an emergency fund. This is a corpus everyone needs, to tide over the phase when you’re out of a job and have no income. Planners suggest the corpus should be as big as 6-12 months’ worth of unavoidable expenses, plus a little something for fun. Unavoidable expenses would include your rent, grocery and food expenses, some conveyance, systematic investment plans (SIP) for MFs, insurance premiums, regular medical bills, and so on.

“When Covid-19 struck all of a sudden and people lost their jobs, the emergency fund suddenly became a hero; a sort of a life saviour to help tide over difficult times,” he says.

Similarly, buy a health insurance policy if you don’t have one already. It’s fine if you are covered by your office. But that’s not enough. Office health insurance covers can vanish overnight if you, say, change jobs and the new job doesn’t provide you with one. Or if your company decides to cut costs.

“I will repay mortgages on time, preferably before time”
Your home loan burden went up significantly in 2022 due to all the rate hikes by the Reserve Bank of India (RBI). In 2023, make a resolution to pay back on time. Although experts believe that interest rate hikes will slow down hereon, Vipul Patel, Founder, MortgageWorld, a loan consultancy firm, is not letting his guard down. “Covid is still around. Anything can happen, interest rates can still go up,” he says.

Also read | After RBI's consistent rate hikes in 2022, what should home loan borrowers do with their home loans?

Patel advises prudence. If, he explains, you are eligible for a loan of, say Rs 1 lakh, then borrow just Rs 80,000. Do not stretch yourself. “Make a resolution that not only will you repay your debt on time, but at every opportunity you will try to prepay your debt,” adds Patel.

In fact, Patel says it’s a good habit to target to repay your home loan within 1/3rd of the original tenure. For instance, if you have a 30-year home loan, try to prepay your loan within 10 years.

“I will enjoy. But I will not misuse my credit card”Eat lots of good food. Travel, visit new places. But don’t max out your credit card regularly. That’s when trouble starts.

Financial influencer Pranjal Kamra, Founder and CEO,  Finology Ventures, says that credit cards often tempt you by offering to increase your credit limit. Remember: it’s not a privilege or reward. It’s a debt trap. “Instead, set it to a level that’s comfortably below the average balance in your savings accounts. Also, always pay your credit card bill in full, not the minimum amount due,” adds Kamra.

Also read | How to select your first credit card?

Kamra has another tip to curb wasteful spending. “Always go grocery shopping on a full stomach. We tend to buy a lot of unnecessary food items when we are hungry”, he says.

“I will make my will in 2023”
Contrary to what many feel, this is not a morbid resolution. A will safeguards your wealth and estate, whether you’re dead or alive. Make an inventory of all your assets — money, investments, jewellery, artefacts, and everything that you have accumulated over the years.

“An estate plan enables you to state your wishes and instructions through a set of legal and non-legal documents as to how you wish your assets to be managed both during your lifetime (especially in case of your incapacitation) and beyond”, says Sneha Makhija, Head of Wealth Planning, Products & Solutions, Sanctum Wealth.

Don’t forget to list down your liabilities as well, especially your loans. After a person passes away, the creditors lend up at the doorstep of the legal heirs demanding their dues. Taxes, if pending, also need to be paid to the government. Your will must ensure that you leave behind enough to take care of your liabilities so that your legal heirs aren’t bothered.

``Listing one’s investments is important as more often than not the inheritors have no clue about this, leading to a huge gap between the actual value of one’s inheritance and the inherited value,” adds Makhija.

Make sure you identify a good and trusted executor when making up your will.

Have a happy 2023!